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Pat Gelsinger VMware

VMware Q4 2015 Earnings: A Closer Look

Pat Gelsinger

Pat Gelsinger

VMware’s Q4 2015 results, delivered this afternoon, beat Wall Street’s expectations and showed some strong IT segments for channel partners — including end-user computing, network virtualization and virtual SAN sales. Still, the news wasn’t all good. The company confirmed 800 layoffs, a CFO transition and a weaker-than-expected 2016 forecast that concerned investors.

Wall Street is watching the earnings especially closely ahead of Dell’s pending EMC buyout. The big picture:

  • Q4 revenues were $1.87 billion, up 10% from Q4 2014.
  • Net income rose 17 percent to $373 million — beating Wall Street’s expectations by a penny per share.
  • VMware’s End-User Computing business grew over 30% year-over-year, bringing the total annual bookings run rate to over $1.2 billion, the company said.
  • NSX, the network virtualization and security platform for the software-defined data centers, grew over 100% year-over-year, bringing the total annual bookings run rate to well over $600 million, the company said.
  • In Q4 2015, VMware’s Virtual SAN business grew nearly 200% year-over-year, with a total annual bookings run rate well over $100 million, VMware asserted.

VMware Targeted Layoffs

Still, the news wasn’t all good. VMware provided softer-than-expected Q1 2016 guidance during an earnings call this evening, which spooked some investors during after-hours trading. Also, VMware cut about 800 positions and will take a $55 million to $65 million charge in the first half of 2016 to cover those costs. The VMware job cuts had been rumored for several days. CFO Jonathan Chadwick is stepping down to pursue outside interests. His successor, EMC CFO Zane Rowe, will become VMware CFO on March 1, 2016.

“VMware’s Q4 2015 was a solid finish to 2015,” said VMware CEO Pat Gelsinger, in a prepared statement. “We were especially pleased with the growth across our portfolio of emerging products and businesses, including NSX, EndUser Computing and Virtual SAN. All of these businesses demonstrated strong growth in both Q4 and for the full year, underscoring the momentum we expect to continue into 2016.”

VMware, Dell and EMC: The Bigger Picture

VMware’s solid Q4 2015 earnings come as Dell works to finalize its $67 billion buyout of EMC — which essentially is VMware’s parent. While channel partners and enterprise customers have generally welcomed the pending Dell-EMC business combination, some investors have questioned the deal’s structure while others have pushed for better financial terms.

Still, the critics fail to note that EMC had a “go shop” period that allowed the company to pursue higher bids for the business. No such bids emerged. For his part, Michael Dell insists the EMC buyout will proceed and earn approval sometime between May and October 0f 2016.

The next potential question mark arrives tomorrow (Wednesday, January 27), when EMC announces quarterly results. Ahead of those earnings, EMC announced some layoffs and repositioned VCE as the EMC Converged Platforms Division. EMC also announced partner program enhancements in recent days.

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