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VMware Reports Third Quarter 2012 Results

VMware Reports Third Quarter 2012 Results

Company Appoints Jonathan Chadwick as Chief Financial Officer

  • Year-over-Year Revenue Growth of 20% to $1.13 Billion
  • Operating Margin of 16.8%; Non-GAAP Operating Margin of 32.2%

Supplemental Financial Tables
Non-GAAP Financial Measures

PALO ALTO, Calif., October 23, 2012 —VMware, Inc. (NYSE: VMW), the global leader in virtualization and cloud infrastructure, today announced financial results for the third quarter of 2012.  Also announced today, industry veteran Jonathan Chadwick will join VMware as chief financial officer (CFO) effective November 5, 2012. 

  • Revenues for the third quarter were $1.13 billion, an increase of 20% from the third quarter of 2011, and 22% measured in constant currency.
  • Operating income for the third quarter was $190 million, an increase of 5% from the third quarter of 2011. Non-GAAP operating income for the third quarter was $365 million, an increase of 28% from the third quarter of 2011.
  • Net income for the third quarter was $157 million, or $0.36 per diluted share, compared to $178 million, or $0.41 per diluted share, for the third quarter of 2011. Non-GAAP net income for the quarter was $303 million, or $0.70 per diluted share, compared to $230 million, or $0.53 per diluted share, for the third quarter of 2011. 
  • Trailing twelve months operating cash flows were $1.97 billion, an increase of 5% compared to the trailing twelve months ended the third quarter of 2011. Trailing twelve months free cash flows were $1.90 billion, an increase of 4% compared to the trailing twelve months ended the third quarter of 2011.
  • Cash, cash equivalents and short-term investments were $4.4 billion and unearned revenue was $3.0 billion as of September 30, 2012.

U.S. revenues for the third quarter of 2012 grew 25% to $554 million from 2011. International revenues grew 16% to $580 million from 2011.

License revenues for the third quarter of 2012 were $491 million, an increase of 11% from 2011.  Service revenues, which include software maintenance and professional services, were $643 million for third quarter of 2012, an increase of 29% from 2011. 

“Third quarter results reinforce VMware’s leadership and momentum as cloud emerges as the de facto IT infrastructure standard,” said Pat Gelsinger, chief executive officer, VMware. “Our Software Defined Data Center platform gives customers a clear path to the cloud, and the recently announced VMware vCloud® Suite of virtualized compute, storage, networking and management capabilities demonstrates our unique ability to deliver proven solutions that speed this journey.”

“We delivered a solid quarter despite tough macroeconomic conditions,” said Carl Eschenbach, chief operating officer and co-president, VMware. “The quarter went as expected and we achieved record quarterly results for total revenue and non-GAAP operating income. Fourth quarter revenues are expected to be in the range of $1.26 and $1.29 billion. Annual 2012 revenues are expected to be in the range of $4.572 and $4.602 billion, an increase of 21.4% to 22.2% from 2011. Annual license revenues are expected to grow between 12.8% and 13.8%.”

Jonathan Chadwick Appointed Chief Financial Officer

Jonathan Chadwick, 46, brings deep industry and business leadership experience to VMware. Most recently, he served as corporate vice president of Microsoft and CFO of Skype, following roles as EVP and CFO of McAfee and in a variety of finance leadership positions in over a decade at Cisco Systems.  Chadwick will be responsible for leading VMware’s global finance organization and will report to Gelsinger.

Commenting on the new addition to VMware’s executive team, Gelsinger added, “As we refine and accelerate VMware’s market and innovation strategy, we are squarely focused on delivering increasing value to our customers and shareholders.  Jonathan’s tremendous talent and experience in financial controls, business operations and strategic planning will be foundational to these efforts, and we warmly welcome him to the leadership team.”

Recent Highlights & Strategic Announcements

  • In late August, VMware hosted VMworld® 2012 in San Francisco.  The event attracted a record 21,000 customers, partners, press and analysts, and 250 sponsors and exhibitors signifying major interest from the IT industry in cloud computing and the next generation of IT.  In early October, VMware hosted VMworld Europe in Barcelona, attracting more than 8,000 attendees to the Company’s regional user conference.
  • On August 27, VMware unveiled a comprehensive solution of cloud infrastructure and management products, expertise and ecosystem support to help customers drive greater efficiency and improve operational agility.  At the heart of the announcement was the new VMware vCloud® Suite 5.1– the first solution to deliver the Software Defined Data Center. The vCloud suite integrates VMware’s leading virtualization, cloud infrastructure and management portfolio into a single SKU, simplifying the adoption of cloud era technologies.
  • Also on August 27, VMware announced new Cloud Ops Intellectual Property (IP) and advisory, transformation and education services.  Based on VMware’s experience helping hundreds of clients worldwide navigate through the complex decisions around building, running and optimizing public and private cloud environments, Cloud Ops has emerged as a new operating model where IT shifts from a reactive, tactical relationship with the business to the role of a strategic partner, helping broker critical, value-added services across an organization.

VMware plans to host a conference call today to review its third quarter 2012 results and to discuss its financial outlook.  The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and can be accessed via the Web at http://ir.vmware.com. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 60 days. 

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About VMware

VMware is the leader in virtualization and cloud infrastructure solutions that enable businesses to thrive in the Cloud Era. Customers rely on VMware to help them transform the way they build, deliver and consume Information Technology resources in a manner that is evolutionary and based on their specific needs. With 2011 revenues of $3.77 billion, VMware has more than 400,000 customers and 55,000 partners.  The company is headquartered in Silicon Valley with offices throughout the world and can be found online at www.vmware.com.

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VMware, VMworld and VMware vCloud are registered trademarks or trademarks of VMware, Inc. in the United States and other jurisdictions. Other marks mentioned herein are trademarks, which are proprietary to VMware, Inc. or another company.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to VMware’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.”

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding VMware’s fourth quarter and annual revenue and license revenue projections, our expectations for leadership and momentum in cloud infrastructure, the roles of our Software Defined Data Center platform, vCloud Suite and Cloud Ops IP and services in the adoption of cloud computing and their benefits to customers, important IT market trends and expectations that VMware’s strategy will deliver increasing value to shareholders and customers.  These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in consumer or information technology spending; (iii) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization market, and new product and marketing initiatives by our competitors; (iv) factors that affect timing of license revenue recognition such as product announcements and promotions and beta programs; (v) our customers’ ability to develop, and to transition to, new products and computing strategies such as cloud computing and desktop virtualization; (vi) the uncertainty of customer acceptance of emerging technology; (vii) changes in the willingness of customers to enter into longer term licensing and support arrangements; (viii) rapid technological and market changes in virtualization software and platforms for cloud and desktop computing; (ix) changes to product development timelines; (x) VMware’s relationship with EMC Corporation and EMC’s ability to control matters requiring stockholder approval, including the election of VMware’s board members; (xi) our ability to protect our proprietary technology; (xii) our ability to attract and retain highly qualified employees; (xiii) the successful integration of acquired companies and assets into VMware; and (xiv) fluctuating currency exchange rates. These forward looking statements are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including our most recent reports on Form 10-K and Form 10-Q and current reports on Form 8-K that we may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.