This summary is based on the fourth quarter fiscal 2008 earnings call conducted by VMware Inc. (VMW) on 26 January, 2009.
Management:
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President, Chief Executive Officer: Paul A. Maritz
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Chief Financial Officer: Mark S. Peek
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Vice President of Investor Relations: Mike Haase
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Chief Operating Officer: Tod Neilsen
Key Investors Issues
- Revenue was $515 million, an increase of 25% from $412 million a year ago.
- Earnings were $111 million or 29 cents, up 42% from $78 million or 19 cents a share in the prior year.
Full Year Highlights:
- Total revenue was $1.9 billion, up 42% from 2007.
- Total deferred revenues increased 11% sequentially to $870 million.
- Net income was $290 million, or 73 cents per diluted share, down 33% compared to $218 million, or 61 cents a share in 2007.
Fourth Quarter Highlights
Revenue was $515 million, an increase of 25% from $412 million a year ago as license revenues were $315 million, up 11% from last year.
- Services revenues were $200 million, an increase of 56% from a year ago while total deferred revenue grew by $90 million during the quarter.
- Software maintenance revenue was $161 million, a 57% increase from last year and professional services revenue was $39 million, up 50% compared to last year but flat sequentially.
- The trend in professional services revenue was due to the transitioning some of the business to partners.
Enterprise license agreements as a percentage of total bookings were 23% with seasonal strengths in ELAs from Enterprise accounts and some weakness in the transactional business.
- U.S. revenues increased 27% from last year to $274 million or 53% of total revenue and international revenue increased 22% to $241 million with bookings growth in China especially strong in the quarter.
- The firm finished the year with over $1.8 billion in cash and $879 million in deferred revenue as cash increased 50% and deferred revenue increased 57%.
Total operating expenses increased 6.3% sequentially to $380 million and the firm acquired four businesses for a total of $48 million.
- Operating margin was 90 basis points less due to acquisitions closed in the past 12 months.
- As a percentage of revenue, COGs declined 10.5% from 11.8% in the prior quarter due to a lower mix of professional services which tend to have lower margins.
R&D expenses totaled $119 million or 23.1% of revenues as compared with 22.8% in the prior quarter.
- Sales and marketing expenses were $164 million or 31.9% of revenues compared with 42.6% in the prior year with the improvement largely due to the strengthening of the U.S. dollar.
- Earnings were $111 million or 29 cents, up 42% from $78 million or 19 cents a share in the prior year as international operating expenses were $12 million lower as a result of the year-over-year strengthening of the U.S. dollar.
- Accounts receivable were $338 million at the end of the year and DSO for the quarter including the change in deferred revenue was approximately 50 days.
Operational Insights:
- The firm now has over 1,500 customers for the management automation products which were introduced in the second quarter of 2008.
- Disaster recovery is the big driver here with Site Recovery Manager gaining 900 customers since being introduced in June.
- The firm is entering 2009 structured into two product business units, the server and the desktop, and three geographic units, the Americas, EMEA and Asia-Pacific which will enable it to strengthen the focus on execution.
On the Virtual Data Center Operating System initiative, customers, find that their entire data center becomes more flexible as their compute capacity becomes accrued, available and on-demand across services.
- Customers increasingly appreciate that virtualization is not just about individual hypervisors, but about how hypervisors can be extended and work together to provide a new compute layer or fabric.
- Customers can look to this extended view of virtualization as the evolutionary way that they can build out private or internal clouds and get to new levels of efficiency and flexibility.
- When you have all the virtualization sub-systems working together across services, things become more efficient and flexible and certain complex operational processes also become fundamentally simpler.
To help customers realize OpEx benefits, WMware begun to release a series of solutions aimed at these specific management tasks.
- To date, these include our Site Recovery Manager targeted at disaster recovery, Life Cycle, Lab Manager, Stage Manager, targeted at the development test staging solutions.
- Closely related to the core VDC-OS initiative is the vCloud initiative which is about working with service providers to enable them to implement compatible software and management.
- This will allow their customers in turn who are using VMware internally to have the option to flexibly move workloads from their internal data center up to the external cloud and back again.
The firm released a major release of the desktop management tool that is necessary to crate and manage those environments on behalf of users called the VMware View 3.0 Suite.
