VMware Profit Beats Estimates on Corporate Contracts

VMware Profit Beats Estimates on Corporate Software Contracts
VMware Inc. rose less than 1 percent to $83.72 at the close in New York. Photographer: Ronda Churchill/Bloomberg

Oct. 23 (Bloomberg) -- VMware Inc., the biggest maker of software that enables computers to run multiple operating systems, reported profit that beat analysts’ estimates as it gained corporate customers.

Third-quarter profit excluding some costs was 70 cents a share, Palo Alto, California-based VMware said in a statement. That surpassed the average estimate of 63 cents a share, according to data compiled by Bloomberg. Sales rose 20 percent to $1.13 billion, matching analysts’ projections.

Already the biggest provider of virtualization software, VMware is benefiting as customers use its products to cut costs by making their servers more efficient and by setting up data centers for cloud computing.

“Everyone’s been having a difficult earnings season, and these guys are bucking the trend,” said Brian Marshall, an analyst at ISI Group. “It goes to show that VMware is basically the operating system of the cloud.”

The company also appointed Jonathan Chadwick as chief financial officer, effective Nov. 5. Chadwick, 46, was previously at Microsoft Corp. as a vice president and CFO of Skype.

VMware advanced in extended trading. VMware rose less than 1 percent to $83.72 at the close in New York. The stock is little changed this year.

Cloud Preparations

Sales in the fourth quarter will be $1.26 billion to $1.29 billion, the company forecast in its statement today. That compares with the $1.28 billion average estimate of analysts.

VMware is benefiting as customers use its virtualization software to boost efficiency and prepare data centers for cloud computing over the Internet, Abhey Lamba, an analyst at Mizuho Securities USA Inc., wrote in a note.

“Management’s new guidance is largely in-line with current forecasts for the December quarter,” Lamba wrote. “We believe the company’s business is likely being impacted by the global macro-environment, but it continues to sign deals due to strong momentum in the virtualization space.”

Third-quarter net income fell 12 percent to $156.8 million, or 36 cents a share, from $177.5 million, or 41 cents, a year earlier.

The company is majority-owned by EMC Corp., which will report earnings tomorrow before the U.S. markets open.

To contact the reporter on this story: Ryan Faughnder in New York at rfaughnder@bloomberg.net

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