Vmware (VMW) 2Q Earnings Fall 12.9 Pct; To Buy Nicira For $1.05B Cash

July 23, 2012 04:33 PM

Stocks: VMW,

(By Balaseshan) VMware Inc. (NYSE:VMW), a provider of virtualization-based cloud infrastructure solutions, reported a 12.9% decline in quarterly earnings due to higher costs and expenses.

In a separate release, the company said it has agreed to buy Nicira Inc. for about $1.05 billion in cash plus about $210 million of assumed unvested equity awards. Nicira is a player in software-defined networking (SDN) and in network virtualization for open source initiatives. The parties expect the acquisition to close during the second half of 2012.

Profit fell 12.9% to $191.73 million for the second quarter, while earnings per share (EPS) plunged 13.7% to $0.44. Adjusted earnings rose to $295.53 million or $0.68 per share from $235.27 million or $0.55 per share.

Revenue jumped 21.9% to $1.12 billion.

Analysts, on average, had expected EPS of $0.66 on revenue of $1.12 billion for the second quarter.

License revenue increased 11% to $517 million, while service revenue, including software maintenance and professional services, climbed 33% to $606 million. U.S. revenues for the second quarter grew 22% to $551 million, while International revenues surged 22% to $572 million.

Looking ahead into the third quarter, the company expects revenue of $1.11 billion to $1.15 billion, while Street predicts $1.14 billion.

For the full year 2012, the company increased its revenue outlook to range of $4.540 billion to $4.635 billion from previous forecast of $4.525 billion to $4.625 billion, while Street predicts $4.59 billion.

VMware closed Monday's regular trading down 0.63% at $89.23. The stock has been trading between $74.69 and $118.79 for the past 52 weeks.

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Comments (1)


7/24/2012 4:31:38 AM Falling asleep at the network switch. by kafantaris With everybody else falling asleep at the network switch, VMware and Nicira have cornered the virtual server market and thus became indispensable to cloud-based services. But up to now these two had at least each other to compete with. This has assured both strong development in virtual controllers and servers as well as fair pricing. Now, however, the two are about to become one. With everybody else lagging far behind, they will be able to not only monopolize the virtual server market, but also annihilate the old hardware-based switches from Cisco and company. "So what," you say. "Survival of the fittest." Not so fast. With the Cisco hardware obsolescence will come a dependency on virtual controllers and servers. This is not bad in itself since they streamline the setting up and maintenance of networks. But it can be bad if the virtual controllers and servers take hold to the exclusion of everything else. Aside from the inherent monopoly in this, we will also have a dependency on a networking platform -- which though efficient, economical, and ingenious -- has nonetheless not been around long enough to warrant a complete reliance on it. A go-slow approach, therefore, might be in order and the Justice Department perhaps ought to look at all the ramifications before it gives its blessing to VMware to buy Nicira. Besides, the two companies have already worked out the necessary protocol to coexist in networks -- without being the same entity. Staying that way might be better for all of us for the time being. Reply Rating: (1) (0)

7/24/2012 4:31:38 AM

Falling asleep at the network switch. by kafantaris

With everybody else falling asleep at the network switch, VMware and Nicira have cornered the virtual server market and thus became indispensable to cloud-based services. But up to now these two had at least each other to compete with. This has assured both strong development in virtual controllers and servers as well as fair pricing. Now, however, the two are about to become one. With everybody else lagging far behind, they will be able to not only monopolize the virtual server market, but also annihilate the old hardware-based switches from Cisco and company. "So what," you say. "Survival of the fittest." Not so fast. With the Cisco hardware obsolescence will come a dependency on virtual controllers and servers. This is not bad in itself since they streamline the setting up and maintenance of networks. But it can be bad if the virtual controllers and servers take hold to the exclusion of everything else. Aside from the inherent monopoly in this, we will also have a dependency on a networking platform -- which though efficient, economical, and ingenious -- has nonetheless not been around long enough to warrant a complete reliance on it. A go-slow approach, therefore, might be in order and the Justice Department perhaps ought to look at all the ramifications before it gives its blessing to VMware to buy Nicira. Besides, the two companies have already worked out the necessary protocol to coexist in networks -- without being the same entity. Staying that way might be better for all of us for the time being.

Rating: (1) (0)