Jan 28 Virtualization software maker VMware Inc
reported a slightly better-than-expected quarterly
profit, helped by higher revenue from license sales.
The company's shares dropped 2 percent to $92.95 in extended
trading, in what one analyst described as a "knee-jerk
Expectations may have been elevated after the company
preannounced fourth-quarter revenue and a first-quarter forecast
last week that largely beat expectations, FBR Capital Markets
analyst Daniel Ives said.
"I think this is an example of some investors ... splitting
hairs here in terms of the company's bookings," Ives said.
"I would still call it ... extremely solid bookings and
overall quarter and guidance," Ives said.
VMware reported on Tuesday unearned revenue of $4.09 billion
as of Dec. 31, up from $3.46 billion in the year-earlier period
and $3.64 billion in the third quarter.
The company prereported some of its results last week when
it announced that it would buy privately held mobile security
company AirWatch for $1.54 billion to tap into rising demand
from companies to secure the smartphones and tablets used by
VMware had then forecast first-quarter revenue of $1.33
bilion-$1.37 billion. Analysts on average were expecting $1.34
In a call with analysts on Tuesday, VMware reaffirmed its
full-year revenue forecast of $5.94-$6.1 billion, largely below
the average analyst estimate of $5.95 billion.
VMware's virtualization software enables the creation of a
virtual machine that acts like a real computer with an operating
system. This helps companies use server and storage space more
efficiently and reduce IT costs.
The company's license revenue grew 15 percent to $687
million in the fourth quarter. Long-term license agreements,
including maintenance and support, make up a quarter to one
third of VMware's sales.
"I would give it an 'A', it is an 'A' quarter," Ives said of
the fourth-quarter results.
Net income rose to $335 million, or 77 cents per share, in
the fourth quarter, from $206 million, or 47 cents per share, a
Excluding items, the company earned $1.01 per share.
Analysts on average had expected earnings of $1.00 per
share, according to Thomson Reuters I/B/E/S.
The company had preannounced fourth-quarter revenue of $1.48
billion last week, above the average estimate of $1.47 billion.