VMware has every reason to use its fiscal fourth quarter and year-end earnings call to crow about its fast-growing virtualization and cloud computing businesses. But despite racking up solid financial results, VMware executives struck a tone of cautious optimism in the company's earnings call Monday.
For the quarter ended Dec. 31, VMware pulled $835.7 million in revenue, up 37 percent year-over-year. VMware's profit more than doubled to $120 million, or 28 cents per share, compared to $56.4 million, or 14 cents per share, during the year-ago quarter. Excluding items, VMware earned 46 cents per share, exceeding Wall Street analysts' estimate of 44 cents per share, according to Thomson Reuters.
For fiscal 2010, VMware's revenue grew 41 percent to $2.86 billion while profit was $357.4 million, or 84 cents per share, a jump of 81 percent from the $197.1 million, or 49 cents per share, the company recorded for the year before. For its current quarter, VMware expects revenue of between $800 million and $820 million, and its fiscal 2011 revenue estimate is between $3.45 billion to $3.55 billion.
VMware CFO Mark Peek noted that the IT spending environment "improved dramatically" during the quarter and said the company experienced its "strongest Q4 budget flush" since going public in 2007. He also noted the "great performance" of VMware's channel partners and direct enablement teams and strong growth in desktop enterprise licensing agreements.
However, Peek also said VMware expects operating margin to stay flat during 2011, and this helped send VMware shares down more than four percent to $83.56 in Monday after hours trading.
VMware President and CEO Paul Maritz seems to think it's too early at this point to start popping the champagne corks.
"The bottom line is we do see thing getting better. On the other hand, the whole industry reported increased spending in Q4," Maritz said in the call. "How much of that is a one-time event or an indication of future strength, no one knows the answer. We are being fairly conservative in our planning."
Still, VMware grew significantly during fiscal 2010, adding 2,000 employees over the course of the year, including 600 through acquisition, to finish the year with a head count of 9,000 employees. Peek said VMware expects to continue hiring in 2011 "at a brisk pace" in order to take advantage of strategic long term growth opportunities.
In a Q&A after the call, Maritz said that after the desktop space, in which VMware has made its longest running investments, VMware sees growth prospects in virtualization management. He also described application virtualization as "incredibly strategic" and said VMware will continue spending in this area.
"We view ourselves as allowing companies to deliver capacity and functionality in a way that's independent from endpoint devices," Maritz said in the call. "We're crafting a strategy that allows virtual desktop with Windows base capabilities to be delivered to so-called thick and thin clients as well as tablets and phone clients."
