VMware revenue beats estimates

VMware reported better-than-expected first-quarter revenue and forecast current-quarter revenue largely above analysts' average estimate as more customers opt for its cloud infrastructure services.

However, the company's shares slipped more than 6 percent in extended trading after it acknowledged a delay in closing some of its enterprise licence agreements (ELAs) in the first quarter as customers looked to sign expanded deals.

VMware has not lost any of those deals to competitors, chief operating officer Carl Eschenbach said on a conference call with analysts.

"We're seeing size and scope of our ELAs continue to grow as customers look to incorporate all of our products and even some of our new products... we're just in much deeper conversations with our customers," he said.

While ELA activity was strong in the first quarter, bullish investors may have been hoping for more, FBR Capital Markets analyst Daniel Ives said.

VMware, in which data storage equipment maker EMC holds an 80 percent stake, forecast current-quarter revenue of US$1.43 billion to US$1.47 billion. Analysts on average were expecting revenue of US$1.44 billion, according to Thomson Reuters.

"We're off to a solid start in Q2 and have already closed a number of ELAs in April," Eschenbach said.

Licence revenue rose about 15 percent, to US$561 million, in the quarter ended 31 March. Long-term licence agreements, including maintenance and support, make up a quarter to a third of VMware's sales.

The company also said there was strong demand for its vCloud software suite, which helps virtualise networks and associated security services along with server and storage space, with about half the enterprise license deals signed in the first quarter including the product.

VMware's net income rose to US$199 million, or 46 cents per share, in the first quarter ended March 31, from US$173 million, or 40 cents per share, a year earlier.

Excluding items, the company earned 80 cents per share.

Revenue rose to US$1.36 billion from US$1.19 billion a year earlier.

Analysts on average expected earnings of 79 cents per share on revenue of US$1.35 billion, according to Thomson Reuters I/B/E/S.

VMware shares, which have risen 43 percent in the last year, fell 5.7 percent to US$99.12 in extended trading on Tuesday. They closed at US$105.15 on the New York Stock Exchange.