VMware Sales Forecast Meets Estimates on Client Contracts

VMware Inc. (VMW), the biggest maker of software that enables computers to run multiple operating systems, forecast second-quarter sales that met analysts’ estimates as more companies sign contracts for its software.

Sales in the quarter ending June 30 will be $1.1 billion to $1.12 billion, the Palo Alto, California-based company said today in a statement. That compares with the $1.1 billion average estimate of analysts, according to data compiled by Bloomberg. In the first quarter, profit excluding some items was 66 cents a share, beating the 60-cent estimate of analysts.

VMware is benefiting as customers install its virtualization software to cut costs by making their servers more efficient and by setting up data centers for cloud computing. The company signed more software licenses as customers look to combine programs onto a smaller number of servers, said Rob Owens, an analyst at Pacific Crest Securities.

“The numbers were a little bit better than we were expecting,” said Owens, who is based in Portland, Oregon, and rates the shares outperform, meaning he expects the stock’s return to exceed the average among its peers.

License revenue in the first quarter rose 15 percent to $481.9 million, ahead of Owens’s $470 million estimate.

First-quarter net income rose to $191.4 million, or 44 cents a share, from $125.8 million, or 29 cents, a year earlier, VMware said. Sales rose to $1.06 billion from $843.7 million, exceeding the $1.03 billion average estimate of analysts.

Confident About Cloud

During a conference call with analysts, Chief Executive Officer Paul Maritz said the company is focusing on competition from Microsoft Corp. (MSFT), which builds virtualization software into its Windows Server products. At the same time, VMware is looking for growth from software that can automate groups of computer servers for cloud computing applications.

“We’re pretty confident that’s a market that’s going to grow,” he said.

VMware rose 2.8 percent to $114.38 in extended trading after the report. Earlier, the stock added 0.7 percent to $111.29 at the close in New York. The shares have risen 34 percent this year.

Investors had anticipated the better-than-expected profit. The company, majority-owned by EMC Corp. (EMC), said last week that results for the current quarter would “broadly meet or slightly exceed” guidance it gave in January. That month it forecast first-quarter sales of $1.02 billion to $1.04 billion.

For the full year, VMware said sales will be $4.53 billion to $4.63 billion, in line with analysts’ estimates of $4.56 billion. Operating margin for the year will be 30.25 percent to 31.25 percent of sales.

Management Shuffle

The software maker announced a management shuffle last week, including the departure of Chief Financial Officer Mark Peek, who helped take it public in 2007. Annual earnings have more than doubled to $723.9 million since 2008, the first full year after Peek joined.

VMware also said on April 11 that Carl Eschenbach has been promoted to chief operating officer and co-president, while Raghu Raghuram was promoted to executive vice president of cloud infrastructure and management.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.