VMware Profit Jumps 60 Percent In Q1, CEO Maritz Touts Cloud Arsenal


VMware sees its vSphere, vShield, vCloud Director and vCenter Operations products as a closely knit family that's helping the company cement a leadership position in the cloud.

"Now that we have these four products in place, we will invest in and update them as a family," VMware CEO Paul Maritz said Tuesday in the company's fiscal first quarter earnings call. "They'll be used by our customers internally for private clouds and by service providers in public clouds. We believe that this hybrid approach will be the way most enterprises adopt cloud computing."

VMware is in a position to get aggressive in selling and marketing four key cloud and virtualization products because it just racked up a blowout fiscal first quarter.

In Q1, VMware's profit soared 60 percent year-over-year to $125.8 million, or 29 cents per share, and revenue jumped 33 percent year-over-year to $844 million. Excluding items, VMware reported earnings of 48 cents per share, easily exceeding Wall Street analysts' average estimate of 42 cents per share, according to Thomson Reuters.

vSphere is still VMware's dominant product and will continue to be for the foreseeable future, Maritz said in the call. However, VMware is taking steps to boost the profile of vShield, vCloud Director and vCenter Operations, both internally and externally.

"We are trying to encourage our customers to adopt the other three products," Maritz said. "We are also encouraging our sales force to equip customers with all four products."

VMware's past acquisitions have required the company to maintain a separate specialized sales force for a period of time, but vCloud Director and vCenter Operations are "closely aligned" to what VMware's sales force is already selling, Maritz said. Both include technology from VMware's acquisitions of Integrien last August and EMC's Ionix portfolio in February.

VMware launched vCenter Operations, which handles performance, capacity and configuration management in virtual and cloud environments running on VSphere, in March.

"We’ve been training all of our sales force in vCloud Operations and we believe that's a do-able challenge," Maritz said.

Maritz said VMware, through its 2009 acquisition of SpringSource, is well positioned for the application development transformation that's going on in cloud computing. Cloud Foundry, the open-source platform-as-a-service (PaaS) that VMware launched last week, represents an effort to bring developers into the fold.

"Cloud Foundry is first and foremost about appealing to developers," Maritz said. "If we can get their support, it'll open opportunities for us to sell infrastructure, data fabric and management products down the line."

For its fiscal second quarter, VMware expects revenue of between $860 million and 880 million, representing year-over-year growth of 28 to 31 percent. For its fiscal 2011, VMware expects revenue of between $3.55 to 3.65 billion, a growth rate of 245 to 28 percent.

In January during VMware's solid Q4 earnings, Maritz struck a tone of cautious optimism in assessing the forward spending climate. But investors sure seem pleased with VMware's Q1: Shares of the Palo Alto, Calif.-based firm rose more than 11 percent to $95.63 in after-hours trading Tuesday.