For any analyst speculation against VMware, you are dead wrong. VMW has proved analysts wrong and blew way past their profit and sales forecasts on Tuesday and boosted its overall outlook, this, while a rush for cloud computing has heightened demand for one key element known as “Virtualization.”
As per the quarter ending on June 30th, VMware earned 34 cents a share, minus one-time items. 70% over the year ago quarter and 6% over the average estimate of analysts polled by Thomas Reuters. Its sales shot by 48% to $673.9 million, nearly 3% over views.
According to Mr. Mark Peek during a conference call with analysts on Tuesday, “We are very pleased with our solid execution in the first half of 2010.” Mr. Peek is the Chief Financial Officer at VMware.
For the current quarter, VMware sees itself achieving sales of $680 million to $705 million, up from the rate of 39% to 44% from a year ago. According to analysts expectations, $671.9 would have been their target. For the year, VMware expects sales of up to $2.725 billion to $2.8 billion, an increase of 35% to 38% over the year before. Analysts were expecting $2.71 billion.
After closing down at a rate of 1% in regular trading, their shares rose by 4.5% in late trading. VMware plays an important role in cloud computing. By doing so, software, data, storage and other technology are delivered over quick networks as opposed to on-site computer systems.
By using VMware, its users have the ability to run multiple “virtual” on a single physical server. This helps to squeeze more usage out of hardware with unused capacity. In addition to lowering the costs, the technology helps to increase the flexibility of data centers. These two benefits make cloud computing practical and economical for users.
According to Katherine Egbert of Jefferies & Co, “When it comes to server virtualization, VMware is definitely dominant. This is a key technology that enables cloud computing by making software workload portable.” Ms. Egbert rates the stock as hold, due to its relatively high value.
Software License Revenue
New software license revenue, that is a marker of future growth, grew 42% in the second quarter to $323.67 million. Operating margin grew by more than six points to 27.7%. This is against the 26.6% that was being expected by analysts.
Reports from other
VMware has helped a great deal to bring the benefits or virtualization (which has been a feature in mainframe computing for long) to realistic low-cost servers and PCs powered by Intel (INTC) chips.
As for Microsoft (MSFT), it is competing with its HyperV line of virtualization software which is catching with small and middle size companies.
According to reports from Intel, solid growth was reported on their side last week I the market for high end server chips. VMware is expected to benefit from that strength in the server market. This is according to Philip Winslow, an analyst from Credit Suisse.