VMware Grows Earnings by Moving Beyond vSphere

by Sean Michael Kerner

While there is still room for growth in server virtualization, VMware sees its future in the cloud.

VMware has perhaps done more than any other vendor to help virtualize data center workloads with its vSphere server virtualization technology. VMware is still pushing forward on server virtualization, but it is now the wider suite of management, server and cloud offerings that will push the company's earnings forward.

VMware reported its third quarter fiscal 2013 results late Monday, with revenue coming in at $1.29 billion, representing growth of 14 percent year-over-year. Net Income was reported at $261 million, up from the $157 million reported for the third quarter of 2012.

Looking forward, VMware provided fourth quarter fiscal 2013 guidance for fourth quarter revenue to range from $1.450 billion to $1.480 billion, for a growth rate of between approximately 12 percent to 14 percent.

"VMware continues to build momentum globally because we’re uniquely positioned to help our customers transform to the mobile cloud era of computing," VMware CEO Pat Gelsinger said during his company's earnings call.

While VMware's early success was founded on its vSphere server virtualization platform, the company has expanded its offerings in recent years. VMware's Chief Financial Officer, Jonathan Chadwick, said that a significant portion of VMware's year-over-year bookings increase is a result of the company's success in the category of products beyond standalone vSphere.

VMware now has a long list of management, automation and cloud suites including vSphere with Operations Management (vSOM), vCloud Suite and the VMware Service Provider Program.

"In Q3, over 40 percent of our license bookings were from these product areas beyond the standalone vSphere," Chadwick said. "This figure is up from approximately 30 percent in Q3 of 2012 and reflects the significant uptake in our newer products, including the success of our suite strategy with vCloud Suites and vSOM."

VMware CEO Gelsinger noted that overall, the market for cloud management is really changing the entire way that IT is built and operated today. He commented that VMware still sees it as being the early days in the transition of cloud management tools replacing the overall way that IT management was done in the past.

"It's old versus new model for cloud management," Gelsinger said. "So in that context we say it's our first inning, maybe second, but certainly not more than that, as there is extraordinary amounts of installed management tools that are yet to be replaced."

Even in VMware's traditional sweet spot of server virtualization there is still room for growth. Carl Eschenbach, President and Chief Operating Officer of VMware, said during the call that there is still a rich opportunity going forward for the non-virtualized workloads that continue to exist. In his view, those workloads that have not yet been virtualized tend to be the most mission-critical Tier 1 applications.

Eschenbach said that as organizations look to virtualize the remaining workloads in their data center, they are looking for more high availability, business continuity and disaster recovery solutions.

"So wide adoption of the remaining workloads to a virtualized state maybe slower than that first 60 or 70 percent we have picked up over the last decade," Eschenbach said. "We actually see a significant up-sell opportunity as we grab to those mission-critical workloads in the future."

Sean Michael Kerner is a senior editor at Datamation and InternetNews.com. Follow him on Twitter @TechJournalist

Photo courtesy of Shutterstock.

Originally published on Datamation.
This article was originally published on Tuesday Oct 22nd 2013
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