Enterprise cloud software maker VMWare, Inc. ($VMW) got a pop after Monday’s closing bell by posting profits that beat, and sales that matched, analyst expectations as margins widened while the company predicted licensing revenue to continue to climb in 2014.
For the third quarter, the Palo Alto, California-based company reported revenue of $1.29 billion, up 14 percent from $1.13 billion in the year prior quarter. Excluding revenues attributable to GoPivotal and all divestitures that occurred in 2013, revenues increased 19 percent. Net income jumped to $261 million, or 60 cents per share, from $157 million, or 36 cents per share, in the same quarter last year. Adjusted profits, which exclude one-time items, improved to $363 million, or 84 cents per share, compared to $303 million, or 70 cents per share, last year.
Wall Street was anticipating EPS of 82 cents per share on revenue of $1.29 billion.
Licensing revenue during the quarter for VMWare, which is majority-owned by EMC Corporation ($EMC), increased from $491 million to $564 million. Services revenue improved from $643 million in last year’s quarter to $725 million.
The worm looks to be turning as the company may have divested in some areas in the last year, but built in others, saying in February that it was buying Virsto Software, a provider of software that optimizes storage performance and utilization in virtual environments, to grow its storage portfolio by maximizing customer’s virtual infrastructure. That news came shortly after missing on fourth quarter expectations, lowering 2013 guidance and saying it was eliminating 900 jobs. The layoff number was not completely accurate in a sense, as the company said it intended to create about 1,000 jobs in high-priority areas. It’s most recent acquisition was announced last week with its plans to acquire desktop-as-a service company Desktone for an undisclosed amount as it continues to virtualize its entire data center.
VMware sells virtualization software, which allows companies to create virtual machines that serve as real computers with operating systems, efficiently operating and conserving server and storage space, while saving on expenses.
"VMware continues to build momentum globally, because we are uniquely positioned to help our customers transform to the mobile-cloud era of computing. Customers are making long-term commitments to VMware to help them liberate resources from their current environments and power their businesses into the future," said Pat Gelsinger, chief executive at VMware in today’s statement.
During the third quarter, VMWare, which generates up to 15 percent of sale from the U.S. government, said it landed its biggest ever enterprise license agreement with the Army, although it noted that sales would likely be flat because of the 16-day government shutdown in the current quarter.
In a conference call following the earnings statement, management guided revenue for this quarter in a range of $1.45 billion to $1.48 billion. Analysts expected $1.48 billion in sales.
In 2014, the company believes that revenue can grow by 15 percent as licensing agreements continue to increase.
Missing estimates has not been friendly to VMWare in 2013, with shares vastly underperforming the major indices by declining about 12 percent so far this year through Monday’s close at $82.65. In extended trading, though, shares popped 13 percent to essentially erase the losses.
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