VMware sales surge but execs voice cautious outlook


VMware sales surge but execs voice cautious outlook

Microscope contributor

VMware is not yet ready to call time on the recession despite posting double digit rises in profits and revenues for the first quarter.

The virtualisation pioneer reported a 35% rise in sales to $634m and an 18% hike in profits to $102m for the period ended 31 March.

The pick up in demand that VMware saw in the previous quarter carried into this one, said CFO Mark Peel. However such was the speed and severity of the economic meltdown that management remains cautious about the uptick.

"We are not yet ready to assume that the world's economy is robust and believe we continue to benefit from pent up customer demand on the heels of a long, dry period," he said in a conference call with analysts.

License revenues climbed 21% to $312m including an eight figure Enterprise Licensing booking signed with a large customer, as services revenues - maintenance and professional services - went up 51% to $322m.
Sales in the US grew 30% to $317m, on a par with International revenues which grew 40% on last year. 

As well as some strength in enterprise sales, particularly to public sector customers, SMEs were also showing greater interest in server virtualisation and VMware predicted adoption would rise relatively faster than other segments.

Tod Nielsen, COO, said smaller customers had "fewer servers...fewer people, processors and cultural implications to deal with as they transform their IT departments. We certainly expect competitive pressures to grow in SMB."

Demand for virtualised desktops was also growing, he added, as one of the world's largest banks had deployed 30,000 seats in the first quarter to centralise management and increase security.

This market has "not yet tipped," said Nielsen as channel partners continue to move customers from evaluation to purchase stage.

Further VSphere building blocks will be released during the remainder of the year which should help partners build private and public clouds for customers, as virtualisation bridges the transition from the PC client era to the cloud.

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