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VMware Earnings Indicate There's More Room for Growth

VMware's first-quarter 2016 financial report April 19 was all about the company numbers and didn't have to mention layoffs as it did last quarter, when the company announced that it was trimming 800 of its 19,000 jobs.

This workforce action was largely due to preparation for the acquisition of EMC, VMware's majority owner, by Dell, which was revealed Oct. 12.

The world's largest virtualization software company reported April 19 that its profits exceeded Wall Street estimates. First-quarter net income was $161 million, down from $196 million a year ago. Total revenue was $1.6 billion. Analysts had projected profit of 84 cents a share and revenue of $1.58 billion, according to data compiled by Bloomberg.

"Q1 was a good start to 2016, both for results and against our strategic goal of building momentum for our newer growth businesses and in the cloud," CEO Pat Gelsinger said on the conference call. "Our results were in line with our expectations for the period and support our outlook for the full year that we articulated in January.

"We grew total revenue 6 percent year-over-year in constant currency to $1.6 billion. VMware's value proposition around the hybrid cloud, software-defined data center and end-user computing continued to resonate with our customers around the world."

The report reassured investors and some analysts that the Palo Alto, Calif.-based software company can still grow despite the corporate ownership uncertainty that the tie-up will harm VMware's central data center software business.

The stock price rose 9 percent to $55.95 in late trading after the company announced a new $1.2 billion share buyback. Since the stock has slumped about 35 percent in the past year, these results were quite welcome.

In terms of guidance, VMware said Q2 sales will range between $1.66 billion to $1.71 billion.

Three months ago in its quarterly report, VMware reported a slowdown in bookings, a measure of future sales, in its core business. While the company's networking business is growing steadily, its cloud strategy—centered around hybrid cloud infrastructure and development—has been reconfigured several times and is still evolving.

Originally published on eWeek.
This article was originally published on April 20, 2016
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