October 20, 2015 / 8:20 PM / 4 years ago

VMware's revenue forecast misses estimates, shares fall

(Reuters) - Virtualization software maker VMware Inc forecast current-quarter revenue largely below Wall Street’s estimates, sending its shares down 5 percent in extended trading.

VMware CEO Pat Gelsinger addresses a news conference in Tokyo July 15, 2014. REUTERS/Yuya Shino

VMware, whose parent EMC Corp is being acquired by Dell Inc [DI.UL] in a $67 billion deal, said EMC and Dell have committed to support the company’s independent partnering strategy.

The company said it had seen softer bookings in the quarter due to speculation about its future and weakness in China, Russia and Brazil.

VMware forecast revenue of between $1.83 billion and $1.88 billion for the fourth quarter, its seasonally strongest.

Analysts on average were expecting revenue of $1.88 billion, according to Thomson Reuters I/B/E/S.

“It seems that dark days are ahead for VMware as this company is heading down a troubled path, the outlook will not sit well with investors,” FBR Capital Markets analyst Daniel Ives said.

The forecast overshadowed VMware’s third-quarter revenue beat.

VMware also said on Tuesday that it would form a new cloud services business with EMC that would operate under the Virtustream brand.

The new business will be jointly owned by VMware and EMC.

“This initiative is around creating a tighter integration for both companies as they go after the elusive cloud opportunity,” Ives said.

Virtustream’s results will be consolidated into VMware’s financials, starting in the first quarter of 2016.

EMC, which owns about 80 percent of VMware, bought Virtustream for $1.2 billion in July.

VMware’s revenue rose to $1.67 billion in the third quarter ended Sept. 30, from $1.52 billion a year earlier.

Analysts on average had expected revenue of $1.66 billion, according to Thomson Reuters I/B/E/S.

Up to Tuesday’s close of $68.76, VMware’s shares had fallen 12.6 percent since Oct.9, the last trading day before Dell’s offer for EMC.

Analysts have said Dell’s plan to create a VMware tracking stock as part of its offer for EMC will likely hit VMware’s share price as the size of the float increases.

Reporting by Anya George Tharakan in Bengaluru; Editing by Sriraj Kalluvila

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