VMware Turns in Stellar Earnings Report but Anticipates 2012 Slowdown
Virtualization software market leader VMware turned in another stellar quarterly earnings report Oct. 17, citing profit of $178 million in the third quarter that more than doubled what it banked a year ago.
However, its chief financial officer also warned of macroeconomic storm clouds ahead in 2012.
The Palo Alto-based company earned 42 cents per share in Q3, and recorded revenue of $942 million, an increase of 32 percent over the same period in 2010. On average, Wall Street analysts had expected earnings of 50 cents a share on revenue of $929.37 million.
"VMware's third-quarter results were driven by growth across all products. Demand was especially strong in the Asia-Pacific markets, and we also experienced the seasonal impact of sales to the U.S. federal government," CFO Mark Peek said on the conference call.
Fourth-quarter revenues are expected to be in the range of $1.03 billion and $1.06 billion, a year-over-year increase of 23 percent to 27 percent, Peek said.
However, 2012 looks like a different story. The next year still will be profitable for VMware, Peek said, but not quite as profitable as 2011.
"There is an expectation of lower growth rates for both IT spending and server shipments relative to 2011," Peek said. "For the first quarter of 2012, we are currently planning for revenues to decline sequentially from Q4 in the range of $1 billion to $1.03, an increase of approximately 18 percent to 22 percent, compared with the first quarter of 2011.
Peek reminded listeners on the call that in Q1 2011, VMware closed five sales in excess of $10 million apiece, and "we do not anticipate this benefit in the first quarter of 2012."
CEO Paul Maritz said that the company would release news Oct. 18 on the opening day of VMworld Europe in Copenhagen about new partnerships for its CloudFoundry project.
VMware describes Cloud Foundry as the world's first open platform as a service (PaaS) offering. The initiative provides a platform for building, deploying and running cloud applications using Spring for Java developers, Rails and Sinatra for Ruby developers, Node.js and other Java Virtual Machine (JVM) languages/frameworks including Groovy, Grails and Scala.