VMware Continues Virtualization Market Romp

VMware Wednesday posted better than expected results for the first quarter, reporting a 25 percent increase in sales as more customers move to virtualize mission critical applications.

The virtualization market leader reported a 52 percent increase in net income to $191.43 million on sales of $1.06 billion in the quarter. Earnings per share, excluding charges, were 66 cents per share. That compares with net income of $125.8 million on sales of $843.7 million in the year ago quarter.

[Related: VMware Memo Outlines View 5.1, Project Octopus Launch Plans ]

The results were above Wall Street expectations of $1.03 billion in sales and earnings per share, excluding other expenses, of 60 cents per share. VMware shares were up $3.16, or 3 percent, to $114.45 in after-hours trading, approaching the 52-week high of $115.19.

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VMware said license revenues for the quarter were $482 million, up 15 percent from the year-ago quarter. Service revenues, which include software maintenance and professional services, were up 35 percent to $573 million compared with the year-ago quarter.

’Whereas before it was considered somewhat avant-garde to virtualize your mission critical applications, it is rapidly becoming something where you are considered the exception if you are not going in that direction,’ said VMware CEO Paul Maritz discussing the results with Wall Street analysts.

’We see all of our core customers now really aiming to get to very very high levels of virtualization way in excess of 50 percent, which is why we think we still have a lot of growth ahead of us just in terms of virtualizing applications -- both existing and new applications -- that are coming into the pool,’ added Maritz.

NEXT: VMware CEO Maritz Sees Microsoft As Biggest Challenge

The robust results come with an aggressive VMware product rollout planned for the rest of the year, including May 2 launches that contain a number of updates such as View 5.1, the latest version of VMware's desktop virtualization software; an on premise version of Horizon Application Manager, a VMware-hosted identity management service; and Zimbra 7.2, an update to the company's open source email and collaboration software, according to an internal memo viewed by CRN.

VMware CFO Mark Peek told analysts to expect a new version of the company’s View product later this year and a new version of VMware’s vSphere cloud platform in the second half of the year.

Maritz said he sees, in the near term, the biggest challenge to the company coming from Microsoft rather than the growing OpenStack cloud platform movement. Both IBM and Red Hat announced plans last week to support the open source OpenStack cloud infrastructure platform.

’OpenStack, at this point, compared to the vSphere environment is still relatively immature,’ said Maritz. ’We see more interest in it in the public cloud space than we do in the private cloud space at this point in time.’

As for Microsoft, Maritz said, VMware ’takes them very seriously and spends a lot of time looking at their products.’ He said VMware’s aim is ’turn our crank faster than we think our competitors are turning their crank and stay ahead in terms of value we are offering the customers. We believe we continue to be in that position even with Microsoft’s new offerings coming to market I presume later this year.’