Search
Homepage Rankings and Research Companies Channelcast Marketing Matters CRNtv Events Acronis #CyberFit Summit 2021 Avaya Newsroom Experiences That Matter Cisco Partner Summit Digital 2020 Intel Partner Connect 2021

VMware Rides vCloud Enterprise Licensing Deals To Solid Q2

VMware showed it's got plenty of growth potential in the second quarter, during which many enterprises bought its vCloud Suite through volume licensing agreements.

VMware, which has seen several top executives leave over the course of the past year, is facing questions about its ability to transition in a market where its core server virtualization hypervisor has become a commodity.

But on Tuesday, VMware reported fiscal second-quarter results that beat Wall Street's expectations, showing that it's still got plenty left in the tank.

VMware reported a profit of $244.1 million, or 57 cents a share, a 27 percent jump from last year's second quarter. Excluding items, VMware earned 79 cents per share, while Wall Street was expecting 77 cents per share. Revenue during the quarter rose 11 percent to $1.24 billion.

[Related: VMware Sells Off Zimbra In Latest Chapter Of Its Corporate Makeover ]

Investors reacted to the results by sending VMware shares up nearly 18 percent to $83.82 in Wednesday afternoon trading. They're now trading at their highest levels since March.

VMware's success had a lot to do with its enterprise licensing agreements (ELAs). Around 37 percent of its total bookings were ELAs, which was a record high for VMware, president and COO Carl Eschenbach said during the company's second quarter earnings call.

Around 75 percent of VMware's vCloud Suite sales came as part of ELAs, and Eschenbach hailed this as a "clear indication of our customers' long-term commitment to VMware and the software-defined data center strategy."

vCloud Suite, first unveiled last August at VMworld, is a bundle of several VMware management, networking, security and storage products that's sold as a single SKU.

One VMware channel partner, who spoke with CRN on condition of anonymity, says vCloud Suite ELA figures show that enterprises are continuing to standardize on vSphere.

However, it's likely that VMware was "wheeling and dealing on the ELA front" to get vCloud Suite included in these agreements, said the source.

"It's the old Microsoft game: If you own it as part of an enterprise agreement, then the argument can be made at the line-of-business level that the software is 'free' because you already 'own' it," the source said.

VMware doesn't report how many enterprises are installing and using the products in the vCloud Suite. So, it's tough to say for sure that customers are, in fact, embracing VMware's entire cloud software stack.

"Just because every enterprise out there 'owns' things like vCloud Director, vCenter Operations, Site Recovery Manager, because they're included in the suite, doesn't mean that everyone is actually using those tools," the source said.

The fact that 75 percent of VMware's vCloud Suite sales came through ELAs raises the question of how many midmarket companies are using it. This segment, which helped drive VMware's growth for the past several years as virtualization moved downstream, is where Microsoft and Citrix have been making gains.

NEXT: More areas of strength for VMware


As it shifts focus beyond the hypervisor, VMware has been building up its portfolio of virtualization and cloud management tools, with products like vCenter Operations Management suite and vCloud Automation Center.

VMware's bundle of vSphere with Operations Management (vSOM) sold at 1.3 times the average sales price of the standalone version of vSphere, VMware's Eschenbach said on the call.

"Our strategy to strengthen the channel and broadly see the market with our management products is off to a good start," Eschenbach said, according to Seeking Alpha's transcript of the event.

End user computing is another pillar of VMware's business, and Eschenbach said license booking for these products, which are also sold as a bundle through the Horizon Suite, "were up in the mid-teens" compared to last year's quarter, Eschenbach said.

Jamie Shepard, regional vice president North America for Lumenate, a Dallas-based VMware partner, is seeing growth in VDI and Horizon Suite, as well as customers using VMware as a "portal" -- or service-oriented catalog -- for private clouds.

"We just built out a whole applications-focused-only team that is driving a lot of VDI adoption," Shepard told CRN.

For its upcoming third quarter, VMware is expecting revenue of $1.27 billion to $1.3 billion, while Wall Street is expecting $1.29 billion.

For its 2013 fiscal year, VMware is expecting revenue of $5.12 billion to $5.26 billion, a slight bump up from its previous forecast of $5.12 billion to $5.24 billion.

PUBLISHED JULY 24, 2013

Back to Top

Video

     

    trending stories

    sponsored resources