VMware results, forecast boosted by strong sales of newer software

By Kshitiz Goliya

(Reuters) - VMware Inc reported a better-than-expected rise in quarterly revenue, helped by strong sales of its newer virtualization software, and the company also said it would buy back $1.2 billion of its Class A stock this year.

Strong uptake of its newer offerings also helped VMware forecast second-quarter revenue largely above analysts estimates, helping send the company's shares up 8.7 percent to $55.95 in after hours trading on Tuesday.

VMware's new virtualization offerings include NSX, which makes networking more efficient, and vSAN, which organises data in a way that increases storage capacity inside servers.

The company expects second-quarter revenue of $1.66 billion-$1.71 billion, compared with the analysts average estimate of $1.66 billion, according to Thomson Reuters I/B/E/S.

VMware, which has been struggling on multiple fronts, is hoping these new products will offset declining demand for its traditional server-virtualization software.

Falling PC sales have hurt sales of VMware's flagship vSphere software, which helps companies cut costs by running multiple operating systems on a single machine. Like other older technology companies, VMware is also trying to keep pace with customers' shift to the cloud.

"The core business is still under pressure," Cross Research analyst Shannon Cross told Reuters. "I think what they did was they threw a billion through this repurchase to shareholders to appease them."

License bookings for NSX doubled in the first quarter, while those for vSAN tripled, VMware Chief Executive Pat Gelsinger said on an earnings call.

This helped push up the company's first-quarter revenue by 5.2 percent to $1.59 billion, beating analysts' average estimate of $1.58 billion, according to Thomson Reuters I/B/E/S.

However, license revenue fell slightly to $572 million from $576 million, as vSphere sales continued to decline.

VMware's total net income fell to $161 million, or 38 cents per share, from $196 million, or 45 cents per share.

Excluding items, it earned 86 cents per share, beating average analysts' estimate of 84 cents.

VMware's parent EMC Corp is being acquired by Dell Inc [DI.UL]. Shares of EMC, which reports results on Wednesday, were up 1.7 percent at $25.99 after VMware's results.

(Reporting by Kshitiz Goliya in Bengaluru; Editing by Sriraj Kalluvila and Savio D'Souza)