Yury Cherenkov/Dreamstime.com
shares are trading modestly lower after the cloud-computing software company posted results for the fiscal first quarter ended April 30 that were largely in line with Street estimates – and consistent with the company’s recent pre-announcement in connection with the appointment of a new CEO.
For the quarter, VMware posted revenue of $2.99 billion, up 9% and about in line with Street estimates. Non-GAAP profits were $1.76 a share, a few pennies ahead of the Street consensus forecast at $1.73 a share.
“We are pleased with our Q1 financial performance as we delivered solutions for customers in strategic areas like multi-cloud, application modernization and digital workspaces, while focusing on providing a broader set of consumption choices with our Subscription and SaaS offerings,” VMware CFO and acting CEO
Zane Rowe
said in a statement.
VMware recently announced Raghu Raghuram will take over as the new CEO, with Rowe staying on as CFO. Raghuram had been executive vice president and chief operating officer, products and cloud services.
VMware is projecting July quarter revenue of $3.1 billion, up 8%, right in line with Street expectations, with non-GAAP profits of $1.62 a share, a few pennies shy of consensus at $1.65 a share.
For the full fiscal year ending in January 2022, VMware sees revenue of $12.8 billion, up 9% from the previous year, and in line with estimates. The company sees non-GAAP profits for the year of $6.88 a share, just a penny shy of consensus.
The full year forecast likely doesn’t reflect additional interest expense in connection with the previously announced plan for majority owner
(ticker: DELL) to spin off its VMware stake to Dell holders. As part of that transaction, expected to close in the 2021 fourth quarter, VMware will pay a large special dividend to its shareholders, including Dell.
Rowe said in an interview with Barron’s that the company continues to expect the special dividend to be between $11.5 billion and $12 billion, with between $2.5 billion and $3.5 billion in cash, with the rest to be financed by new borrowings.
Rowe said the company has held discussions with credit rating agencies and expects that VMware can keep its investment grade credit rating, although no details on the expected financing have been announced to date.
He says VMware is making progress in expanding the subscription and cloud-based portion of its software business. In the quarter, subscription and SaaS (software as a service) revenue was $741 million, up almost 30% from a year ago, accounting for about a quarter of total revenue. VMware’s legacy perpetual license business was stronger than expected in the quarter, Rowe says, at $646 million, down 2% from a year earlier. Services revenue was $1.6 billion, up 7%.
Rowe says he is “encouraged by the data we’re seeing” on enterprise spending, and notes that the company still expects a gradual recovery throughout the course of the year.
In late trading, VMware is down 1.4%, to $159.
Write to Eric J. Savitz at eric.savitz@barrons.com
