Hybrid Cloud, Network Virtualization, End-User Computing Drive VMware’s Q3 Results

October 22, 2014 Off By David
Object Storage

Grazed from Trefis. Author: Editorial Staff.

VMware announced its third quarter earnings on Tuesday, October 21. The company reported an 18% increase in net revenues over the prior year quarter to almost $1.52 billion – close to the upper end of the guidance given at the end of Q2. Services revenues were up by 21% y-o-y to $876 million while software license sales rose by 14% to $639 million. VMware has maintained its full year net revenues guidance at just over $6 billion, which is 15-16% higher than 2013 revenues.

In line with our expectations, software licenses gross margin (GAAP) expanded by almost 2 percentage points to 92.8%. On the other hand, as the company generated higher service revenues from hybrid clouds, network virtualization and end-user computing, its cost of services rose by nearly 50% y-o-y to $196 million. As a result, the gross margin (GAAP) for the services division was about 4 percentage points lower than the year ago period at 77.6%…

Moreover, VMware’s operating expenses, including research and development, sales, marketing and other administrative expenses, were 25% higher than the year-ago quarter at over $1 billion in Q3. Consequently, the company’s reported net income was 20% lower than previous year levels at $244 million. However, VMware’s non-GAAP adjusted net income was about 4% higher than Q3 2013 at $377 million – in line with the company’s expectations. VMware expects its non-GAAP operating margin to be 31% for the full year – about 150 basis points higher than the operating margin in Q2. The company expects that the integration of technology from the AirWatch acquisition and related cost synergies could help improve profitability through the rest of the year…

Read more from the source @ http://www.trefis.com/stock/vmw/articles/261257/oct-21hybrid-clouds-network-virtualization-end-user-computing-drive-vmwares-q3-results/2014-10-22