VMware Profit Drops 13 Percent In Q2, Execs Hail Nicira Deal


VMware Monday reported fiscal second quarter results that were mostly in line with Wall Street's expectations, but ended up being overshadowed by the Palo Alto, Calif.-based vendor's $1.2 billion acquisition of network virtualization startup Nicira.

VMware's second-quarter net income was $191.7 million, or 44 cents a share, down nearly 13 percent from the $220.2 million and 51 cents a share it turned in during last year's second quarter. Excluding items, VMware earned 68 cents per share, while Wall Street analysts polled by Thomson Reuters were expecting 66 cents per share.

Last week, VMware pre-reported second quarter revenue of $1.123 billion, up 22 percent year-over-year and in line with its earlier guidance of $1.100 billion to $1.120 billion.

[Related: VMware Plunks Down $1.2 Billion To Acquire SDN Startup Nicira]

Nicira is VMware's most expensive acquisition to date, said CEO Paul Maritz, who is moving over to EMC on Sept. 1 to take the newly created role of chief strategist.

However, Nicira is poised to transform networking in much the same way as VMware has transformed the data center with server virtualization, Maritz said.

"Our strategy is to be a leader in providing the software ingredient of the software defined data center," Maritz said in the earnings conference call. "With Nicira, VMware is well positioned to provide the networking function for other, non-vSphere based pools of infrastructure. This is a deepening and a broadening of our strategy."

VMware will pay $1.05 billion in cash and $210 million of assumed unvested equity awards for Nicira, a Palo Alto, Calif.-based startup founded by Stanford University researchers Martin Casado and Nick MeKeown and University of California at Berkeley researcher Scott Shenker.

For its third quarter, VMware is expecting revenue between $1.11 billion and $1.15 billion. For fiscal 2012, VMware is expecting revenue of between $4.540 billion and $4.635 billion and non-GAAP operating margins between 30.25 percent and 31.25 percent.

PUBLISHED JULY 23, 2012