Cloud software maker VMware Inc reported a higher-than-expected quarterly profit as it sold more licenses to enterprise customers and indicated that strong licensing revenue growth would continue into next year.<\/p>\n
The company said it expected revenue to grow 15 percent in 2014 on continued strength in its enterprise licensing business and higher demand for its vCloud Suite of products.<\/p>\n
“The guidance for next year is for a stronger license trajectory, which remains the key ingredient in the company’s recipe for success over the coming years,” FBR Capital Markets analyst Daniel Ives told Reuters.<\/p>\n
License revenue rose 15 percent in the quarter ended September 30, VMware said on Monday.<\/p>\n
VMware shares rose 9 percent in extended trading, while those of parent EMC Corp rose 5 percent, even though VMware lowered the upper end of its full-year revenue forecast range to $5.21 billion from $5.26 billion.<\/p>\n
Analysts on average were expecting revenue of $5.20 billion, according to Thomson Reuters I\/B\/E\/S.<\/p>\n
VMware sells virtualization software, which 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.<\/p>\n
The company’s vCloud Suite of products, introduced in 2012, allows companies to build a complete cloud infrastructure.<\/p>\n
“The strength in the quarter was licenses. They had a very good license quarter and that’s kind of front and center for investors,” Ives said. “It seems the company is poised to see a nice reacceleration in license revenue heading into 2014.”<\/p>\n
VMware said it signed its largest-ever enterprise license deal with the U.S. Army in the third quarter.<\/p>\n
The company, which gets 10-15 percent of its revenue from the U.S. government, said it expected government-related revenue to be flat in the current quarter, which included a two-week government shutdown.<\/p>\n
VMware raised the high end of its full-year revenue forecast range in July, saying government demand and enterprise deals were likely to pick up in the second half.<\/p>\n
Over the last year, VMware has been renewing its enterprise licensing contracts at a higher rate and adding more enterprise customers, Mizuho Securities USA analyst Abhey Lamba wrote in a pre-earnings note.<\/p>\n
Long-term license agreements including maintenance and support make up a quarter to one third of VMware’s sales.<\/p>\n
VMware said third-quarter net income rose to $261 million, or 60 cents per share, from $157 million, or 36 cents per share, a year earlier.<\/p>\n
Excluding items, the company earned 84 cents per share.<\/p>\n
Total revenue rose 14 percent to $1.29 billion.<\/p>\n
Analysts on average had expected earnings of 82 cents per share on revenue of $1.29 billion, according to Thomson Reuters I\/B\/E\/S.<\/p>\n
(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Ted Kerr)<\/p>\n
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