VMware's sales disappoint, shares plunge
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The virtualization specialist reports a sharp rise in earnings, but its sales fall short of what some analysts had been expecting. Shares fell more than 25 percent in after-hours trading.
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NEW YORK, October 22  - Microsoft Corporation (MSFT.NAS) has projected its current quarter sales below the Wall Street expectations, since the company&#39;s customers are likely to delay some contract agreements.
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(InfoWorld) - Three years after being bought by EMC, VMware is going public.Â EMC announced plans Wednesday to offer 10 percent of its virtualization software subsidiary in an initial public offering (IPO). The offering will "unlock more of VMware's value for EMC shareholders," and help the company "retain and attract the software industry's top talent," EMC Chairman, President, and CEO Joe Tucci said in a statement. "We think now is the point where the planets are aligned and this makes sense," Tucci said on a conference call with financial analysts. WhenÂ EMC acquired VMwareÂ in 2004, it had 300 employees; today it has 3,000, he said. "The growth rate of this company has been phenomenal." EMC plans to file a registration statement with the U.S. Securities and Exchange Commission in late March or early April for the planned IPO, and the shares could be available for sale some time in the second quarter, said David Goulden, executive vice president and chief financial officer of EMC. The shares to be put on the market will be new shares, not ones already owned by EMC, Goulden said. The proceeds will "provide VMware with the financial resources it needs to achieve its full growth potential and provide EMC with the potential to return a portion of the original investment in VMware to EMC shareholders, while enabling them to continue to enjoy the vast majority ownership in this strategic and fast-growing business," Goulden said. Virtualization, which allows a server to better run multiple applications simultaneously, has helped businesses reduce the number of servers they need, reduce their energy consumption and assist in data center disaster recovery efforts, said Diane Greene, who founded VMware in 1998. She is president of VMware and executive vice president of EMC. "The IPO is a powerful way for us to accelerate our vision of a pervasive, industry standard virtual infrastructure. We see an incredible opportunity ahead of us," Greene said. More than 10 percent of new x86 server workloads are running on VMware virtualization software, and VMware is used by more than 20,000 customers, Greene said. Analysts have recently speculated on whether EMC would spin off VMware, said Gordon Haff, principal IT advisor with research firm Illuminata Inc. "EMC wants to get some of the money while VMware is clearly a hot property," he said. "On the other hand, they clearly want to retain a very large chunk of VMware." EMC's stock (EMC) has been stuck in the $10 to $15 range for the last three years. The IPO was announced after the New York Stock Exchange closed for the day. In after-hours trading, EMC shares rose $0.91 to $14.55. Tucci's comments about unlocking VMware's value "might be less politely phrased as 'hopefully getting the shareholders off my butt,'" Haff said. VMware is an early leader in one of the IT industry's hottest market segments. The company's revenue was up 83 percent in 2006, totalling $709 million, EMC said. The IPO should generate capital for VMware to invest in innovation, said Allan Krans, an analyst with Technology Business Research. Although VMware is the industry leader in server virtualization software, MicrosoftÂ is expected to introduce an update of its Microsoft Virtual Server in the fourth quarter of 2007, which could increase competitive pressure on VMware.
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Plus: STMicro sees market recovery...VMWare profit rises as software sales climb...Amazon margins a concern...AT&T profit rises.
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EMC Corp. of Hopkinton is selling a $218.5 million stake in its VMware Inc. software subsidiary to chip maker Intel Corp. The move comes as EMC prepares to raise up to $949 million by selling about 10 percent of VMware to the public.
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Newly public virtualization software company VMWare Inc. said Wednesday its third-quarter profit beat Wall Street expectations as a growing number of companies adopted its technology.
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The mystery of what went wrong for the  software industry in late June when sales stalled at more than  20 brand-name companies is not even close to being solved  although the third quarter is nearly halfway over.
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VMware is the early leader in a fast-growing market for virtual-machine software, putting it on a collision course with Microsoft.
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77 per cent profit boost EMC saw its stock price leap more than eight per cent today, thanks in part to its 86 per cent stake in the hotter-than-hot virtualization outfit, VMWare.â¦
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The computer retailer's financial disappointments continue in the fourth quarter with plunging desktop sales and flat notebook sales.
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(InfoWorld) - The president of virtualization software leader VMware Wednesday questioned the strategy of rivals that are integrating virtualization functionality into their operating systems. Diane Greene made the comments at the third and final day of the Morgan Stanley Technology Conference in San Francisco. VMware, a subsidiary of storage vendor EMC, doubled revenue in EMC's latest quarterly report, compared to the year ago quarter, as enterprises embrace VMware's virtualization software to make more efficient use of the servers in their data centers. RivalsÂ like Red Hat and Microsoft have responded to VMware's dominance by integrating virtualization into coming new operating systems. Red Hat is introducing Red Hat Enterprise Linux 5 next week, and Microsoft's new Windows server OS is due later this year. But Greene, in discussing virtualization with analysts for the investment firm, said she wonders how effective the competition's virtualization features can be. "Traditionally, the operating system manages the hardware and manages the application. Once you virtualize with a hypervisor, that is now what is managing the hardware, not the OS," Greene said, in a presentation that was distributed via webcast. "Now the operating system is just managing the application. So certainly Windows and Red Hat are moving to integrate virtualization into their OS, but part of the value proposition seems to be lost when you do that." Spokespeople for Microsoft and Red Hat did not respond to requests for comment. VMware is a strong contributor to the earnings of parent company EMC, which also sells storage hardware and security software. Greene also is executive vice president of EMC. Revenue for VMware increased to $232 million in the fourth quarter of 2006, 101 percent more than a year prior. The growth comes from increased demand for VMware Infrastructure 3, a virtualization software suite for servers and storage networks. VMware's growth prompted EMC to recently announce plans toÂ spin off 10 percent of VMware in an IPO. EMC executives said they anticipate releasing the prospectus later this month for the IPO, expected about midyear. Greene noted the stock sale will benefit VMware employees as well as potential shareholders. "Our stock-based compensation will track our performance, and that is the ideal model," she said. Also at the Morgan Stanley conference, Greene acknowledged that virtualizing servers, which helps them use more of their designed capacity, may suppress server sales growth. But she said many customers are upgrading servers as they introduce virtualization into their operations. Those new servers are more high-end products, with greater processing power, and should yield higher margins for server vendors. EMC reported fourth quarter 2006 financial results Jan. 23, posting net income of $389 million, or $0.17 a share, on revenue of $3.21 billion. It edged out analysts' estimates of $0.16 a share. Â
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Just three months ago, investors of technology stocks watched values plummet after some 20 software companies warned Wall Street that sales would remain lackluster in what turned out to be a brutal second quarter.
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Shares of Hewlett-Packard Co. , the No. 1 manufacturer of PCs and printers, fell 4 percent on Wednesday after its quarterly results underwhelmed some investors and raised questions about its growth momentum.
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The virtualization market leader saw its stock price drop sharply after reporting fourth-quarter financial results that fell short of Wall Street's profit forecasts.
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September quarter was a good one, but software maker's revenue forecast for current period falls short of analysts' expectations.
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The company's sales fall, pulling down its stock price.
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Shares in Lenovo , which bought IBM's ailing personal computer business in 2005, dived more than 14 percent on Wednesday after a broker cut the Chinese firm to sell on growing fears of a U.S. recession.