July 24 (Bloomberg) -- VMware Inc. rose the most in more than four years after the software maker reported second-quarter sales and profit that exceeded analysts’ projections, helped by customers’ renewal of multiyear licenses.
Profit before certain items was 79 cents a share on sales of $1.24 billion, VMware said yesterday in a statement. That beat analysts’ average estimate of 77 cents on revenue of $1.23 billion, according to data compiled by Bloomberg. The shares surged as much as 17 percent.
VMware, which is majority-owned by EMC Corp., makes software that lets computers run multiple operating systems. The better-than-projected sales and profit, as well as a forecast for third-quarter revenue that was in line with estimates, may help reassure shareholders that customers are renewing long-term contracts and that spending won’t deteriorate further this year.
“The enterprise license-agreement renewal cycle has probably started to kick in,” said Abhey Lamba, an analyst at Mizuho Securities USA Inc. who recommends buying the shares. Bookings, a measure of future revenue, were $1.45 billion, he said. Analysts on average had estimated $1.25 billion, he said.
VMware shares rose 16 percent to $82.90 at 1:01 p.m. in New York, and earlier touched $83.30 for the biggest intraday gain since October 2008. The stock had dropped 20 percent in the past year as sales growth slowed, hurt by reduced technology budgets at U.S. companies and federal agencies.
Second-quarter net income rose 27 percent to $244.1 million, or 57 cents a share, from $191.7 million, or 44 cents, a year earlier, VMware said.
Sales in the current period will increase to $1.27 billion to $1.3 billion, the Palo Alto, California-based company said, compared with an average analyst estimate of $1.28 billion. In last year’s third quarter, sales were $1.13 billion. Annual revenue will be $5.12 billion to $5.26 billion. Analysts on average projected $5.17 billion, compared with $4.61 billion in 2012.
EMC, the world’s biggest maker of storage computers, reported second-quarter earnings that met analysts’ estimates as customers bought new machines to handle surging volumes of data.
Profit before some costs was 42 cents a share, the Hopkinton, Massachusetts-based company said today in a statement. That matched the average analysts’ estimate, according to data compiled by Bloomberg. Sales also met analyst estimates, with $5.61 billion reported.
EMC is benefiting as customers invest in new equipment to run Web-based applications and store reams of digital content. It also got a boost from increased contract renewals at VMware.
Sales growth is likely to accelerate in the second half of the year, said Lamba, who recommends buying the shares.
Shares of EMC advanced 5.6 percent to $26.75, and were little changed this year through yesterday.
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