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Author Topic: The future of vmware  (Read 2325 times)

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The future of vmware
« on: 23. April 2009., 15:49:53 »

VMware has reported a first-quarter profit but says that sales are being hit by the recession and it might report its first-ever drop in revenue next quarter.
Revenue for the period to March 31 was $470m, up by 7% from the same quarter last year but a fraction below what analysts had predicted, according to Thomson Reuters.
Licence revenue declined 13% from a year ago, to $257m, as customers cut their IT spending and signed fewer large deals, VMware says. The drop was offset by a 48% jump in service revenue, which includes software maintenance fees and is becoming a larger part of VMware’s business.
Net income for the quarter was $69,9m, or $0,18 per share, up from $43,1m, or $0,11 per share, in the first quarter of 2008. Excluding one-time charges, the earnings were $0,25 per share, up from $0,22 a year earlier. That beat the estimates of financial analysts, who had forecast a 10% drop in earnings, to $0,20 per share.
The tough economic climate, combined with the transition to a new version of VMware’s core software, will depress VMware’s sales in the current quarter, says CFO Mark Peek.
"As a result, we expect our second quarter revenues will be flat, or even down, compared to the second quarter of 2008," he adds.
That would be a first for VMware, which has seen its revenue climb every quarter since it went public two years ago. The growth has been slowing, however, as VMware grows larger and the initial wave of virtualisation adoption starts to slow.
VMware has introduced vSphere, an improved version of its core software, which is said to include capabilities for fault tolerance, storage management and network management. It is due for release by the end of the quarter.
VMware said the product positions it well for the future, but in the short term it will be a disruption for its sales operation and its partners, who will have to recertify products to work with vSphere. That disruption partly explains the weak forecast for the April quarter.
The other factor is the economy. "Basically, customers battened down the hatches and were reluctant to spend on anything not operational," says CEO Paul Maritz. VMware signed two large enterprise licensing agreements during the quarter, but in general customers are making smaller purchases, he says.
"Despite the quick ROI from virtualisation, customers have generally put the brakes on all new investment," Peek says. Sales in Europe were particularly weak, he adds.
In the coming quarters, VMware plans to introduce new management tools for vSphere that are designed around specific "scenarios" such as test and development, disaster recovery and application management, Maritz says.
"These management suites are important as they will constitute the new user interface to the vSphere platform and allow customers to get out of the business of managing plumbing and basically focus on the things that are truly business-critical to them," he adds. Maritz didn’t provide any other details and a VMware spokeswoman says that the company will not comment further on them yet.
VMware expects Microsoft to emerge as a bigger competitor over time, but Maritz says that competition and pricing pressure are not contributing to the decline in its business. "The macroeconomic conditions are the major factor," he says.
He calls the first quarter results "solid" given the challenging climate. The company added 11 000 new customers during the quarter for VMware Infrastructure 3, he says. Three quarters of VMware’s 350 biggest customers have standardised on VMware, according to Maritz, and some are running more than 5000 virtual machines in their data centres.
The company is in a strong cash position, with more than $2bn in the bank, which will allow it to maintain its research and development during the downturn, Peek says.
Investors reacted negatively to the results. VMware’s share price dropped by 15% in after-hours trading, to $27,60, having risen by almost 8% earlier in the day.

(IDG News Service)

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The future of vmware
« on: 23. April 2009., 15:49:53 »


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