Former VMware CEO Boasts Of ‘Winners and Losers’ To Analyst During Falsely Inflated Quarter

Analyst John DiFucci was stumped while listening to VMware’s revenue numbers for its first quarter 2020. Other infrastructure software companies had posted soft quarters, but not VMware. During the earnings call, he asked then-CEO Pat Gelsinger, who’s now the chief executive of Intel Corp., for help figuring out how it was that VMware had not succumbed to the slowdown he saw elsewhere, according to the transcript.

“I don’t want to spend too much time on that because it was really strong results here, but VMware aside I guess Pat (Gelsinger) then (CFO) Zane (Rowe) two of you have anything to contribute here. Do you have -- you have a view that we don’t have right like why do you think so many others are seeing some softness out there because they are. I mean I got three companies tonight and you guys are a lot better than the other two,” he asked during the May 30, 2019 earnings call. “Do you have any thing you can share with us here? And also why hasn’t this a really affected you?”

Gelsinger said it was partially due to the fact that VMware’s “strategy is resonating well into the future and super pleased with the execution of my team to deliver a very solid quarter.”

“As you’ve heard me say before, there’s going to be some winners and losers on different technology trends in side of that,” Gelsinger told DiFucci.

In fact, the SEC said VMware would not have met the analysts’ consensus estimates for total revenue that quarter, and it would not have hit its own guidance to them for license revenue, if it had not held, then carried forward sale from the previous quarter.

VMware’s CFO Zane added to Gelsinger’s comment to the analyst, “We’re comfortable with what we’re seeing early and feel good about our forecast for the year.”

Barclays analyst Raimo Lenschow followed up DiFucci’s question saying he wanted to stay on the topic of future sales, and questioned if Gelsinger or Rowe would keep guidance high for the first half of the year since the market showed competitors slowing.

Gelsinger replied: “We’re feeling quite good about the momentum that we see going into Q2 and for the second half,” with Rowe adding “some of our competitors seeing a little bit of weakness and some volatility and variability quarter-to-quarter. So again we’re comfortable where, how we’re positioned for the year and like the forecast.”

However, the SEC said VMware’s prediction for license revenue in the first half of that year would not have come to pass if it had recorded sales in the quarter they were made.