VMware Soars Past Q4 Estimates
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VMware shrugged off a tough economy and challenges to its dominion of the virtualization software market on Monday when it leapfrogged analyst estimates for its fourth quarter earnings.
For the quarter ended December 26, 2009, VMware (NYSE: VMW) posted a profit of $127 million, or $0.31 a share, on sales of $608 million. A consensus survey of analysts by Thomson Reuters pegged the virtualization software maker for a profit of $0.26 a share on sales of $553.7 million.
The $608 million in sales represents an impressive 18 percent surge from the year-ago quarter when it earned $142 million, or $0.36 a share, on sales of $515 million. Including one-time charges, the Palo Alto, Calif.-based company recorded net income of $56 million, or $0.14 a share, down from net income of $111 million, or $0.29 a share, in the fourth quarter of 2008.
"We're seeing a major shift in our industry," CEO Paul Maritz told a conference call with analysts. The great recession of 2009 convinced customers they can't prop up aging infrastructure forever. We believe virtualization is key to this." He added "It's not just a tactical ingredient but, in fact, a strategic layer to build the datacenter of the future."
VMware rocketed up $7.10 a share, or 17 percent, in after-hours trading Monday to a 52-week high of $49.10. It had closed the day up only $0.42 a share to $42 in the regular trading session.
"We're pleased with how far we've come in 2009 despite very difficult conditions," CFO Mark Peek said during a conference call with analysts. "We launched two new products, including vSphere. We're pleased with our execution and strong performance throughout the year."
For the year, VMware pocketed $401 million, or $1.00 a share, on sales of $2 billion, compared to a profit of $416 million, or $1.05 a share in 2008. The $2 billion in sales for the year marked an eight percent improvement.
Peek told analysts the company benefited from "pent-up" demand in the fourth quarter, adding "we have better short-term visibility now than we had from any of the first three quarters of 2009."
"Our customer base clearly finds significantly value in our products," Peek said. "We ended 2009 with and outstanding fourth quarter."
VMware officials said its services revenue, which includes software maintenance and professional services fees, increased 52 percent from the year-ago quarter to $304 million.
International sales for the year rose 10 percent to $985 million while U.S. sales inched up five percent to $1.04 billion.
Looking ahead to 2010, VMware told analysts to expect sales of between $580 million and $600 million in the first quarter, up dramatically from the current Street forecast of roughly $530 million.
For 2010, VMware is predicting sales of $2.45 to $2.55 billion, up 21 to 26 percent over the $2 billion it garnered in 2009 and well ahead of analyst forecasts of around $2.3 billion.
Last quarter, VMware topped analyst estimates when it returned a profit of $95 million, or $0.24 a share, on sales of $490 millionwell above the $0.20 a share profit and $473 million revenue figure most had expected.
At the time, VMware also raised its fourth-quarter sales forecast to between $540 million and $560 million, well above its previous guidance of roughly $523 million.
New product launch
VMware on Tuesday will outline the details of a new "elegant solution" it's developing with Cisco Systems (NASDAQ: CSCO) and NetApp (NASDAQ: NTAP).
Analysts expect Tuesday's festivities will be the latest in a series of "integrated stack" announcements from server, data storage and networking vendors. NetApp rival EMC (NYSE: EMC) announced an integrated data center partnership with its VMware subsidiary and Cisco in November, while HP (NYSE: HPQ) and Microsoft (NASDAQ: MSFT) unveiled their own alliance in December.
VMware shares peaked at $47.60 earlier this month after tumbling to a 52-week low of $19.16 in March.
Twenty-four of the 34 analysts tracking the stock maintain either a "hold" or "neutral" rating with seven others calling it a "buy" or "strong buy." One analyst is advising clients to sell the stock and two others have assigned it an "underperform" rating.
Update adds executive comments from today's earnings call.