UPDATE 1-VMware revenue rises as software demand grows

Tue Jul 22, 2014 5:07pm EDT

(Adds details, analyst comment, share price)

By Lehar Maan

July 22 (Reuters) - VMware Inc posted a better-than-expected 17 percent rise in quarterly revenue as more customers signed up for its virtualization software, which helps cut the cost of moving data to the cloud.

VMware's shares rose 2 percent after the bell, after the company also reported net income above analysts' expectations.

"This was a big shot in the arm for VMware, and its investors, as the company appears to be hitting on all cylinders on its growth strategy," FBR Capital Markets analyst Daniel Ives wrote in an email to Reuters.

VMware, like rival Citrix Systems Inc, makes virtualization software that enables the creation of a virtual machine. Acting like a real computer with an operating system, it helps users to store data more efficiently and cut IT costs.

VMware said second-quarter revenue rose to $1.46 billion from $1.24 billion. Revenue from licensing grew 16 percent to $614 million and services revenue rose 18 percent to $843 million.

Net income fell to $167 million, or 38 cents per share, in the quarter ended June 30, from $245 million, or 57 cents per share, a year earlier.

Net income for the quarter included the impact of the company's $1.54 billion acquisition of mobile security company AirWatch.

Excluding items, the company earned 81 cents per share.

Analysts were expecting a profit of 79 cents per share on revenue of $1.44 billion, according to Thomson Reuters I/B/E/S.

The Wall Street Journal reported on Monday that activist investor Elliott Management Corp had taken a $1 billion stake in EMC Corp with the aim of pushing it to spin off VMware. EMC owns about 80 percent of VMware.

VMware's shares rose to $97.90 after the bell after closing at $96.03 on Tuesday. (Editing by Don Sebastian and Robin Paxton)