VMware has reported a cracking first quarter for 2016, with year-on-year revenue growth of five per cent making for a US$1.59bn revenue haul for the three months to March 31st.
Not everything is rosy down VMware way: compute virtualisation sales were off ten percent and revenue down one point, as expected. Licence sales ticked up a little, but revenue from licence sales fell. GAAP net income for the first quarter was $161 million, or $0.38 per diluted share. That's down from the $196 million, or $0.45 per diluted share, from 2015's first quarter.
On the upside, NSX sales grew 100 per cent year-on-year as users find more things to do with it, including manage Cisco kit. VSAN sales grew by 200 per cent, albeit from a low base. VMware CEO Pat Gelsinger said his years at EMC taught him that it takes a couple of years for storage platforms to mature. VSAN's therefore expected to accelerate.
End-user computing sales are growing, albeit rather more slowly than VSAN and NSX. VMware said it has “taken out” competitive products in recent big end-user computing wins and that nine of its ten biggest deals last quarter included some of its end-user portfolio. Performance might have been better were it not for the integration of the company's Horizon and AirWatch sales forces, which made for some wobbles especially in EMEA. Gelsinger said it made sense to combine the two sales teams, as its Workspace One suite combines all its end-user compute products and customers are buying the bundle. It's hoped the sales team will settle soon.
Another nice number mentioned was seven per cent, the contribution that hybrid cloud and software-as-a-service made to Q1 revenue. Lots of that was money from VMware's cloud partners, outfits that run up their own VMware-powered clouds. Gelsinger made many mentions of those partners, especially IBM which he said represents “the biggest incremental amplification opportunity we have ever had in the vCloud Air area.”
That remark and the emphasis on partners' contributions to hybrid cloud revenue says a lot about VMware's pivot from being a cloud-builder to cloud-enabler. Indeed, vCloud Air was mentioned as if both partners' and VMware's own cloud are one and the same, strategically at least.
Another small change in language worth noting was Gelsinger's omission of EVO:RAIL when discussing hyperconverged infrastructure. VSAN is VMware's horse in this race now.
Another quote of note came when financial analysts asked Gelsinger about OpenStack.
“Customers have attempted to take advantage of OpenStack distributions or components and after throwing tens of engineers at it they are unable to get a reliable scalable environment,” Gelsinger said.
“We are seeing this repeated pattern,” he said, with OpenStack experimenters coming back to VMware. “This pattern of the immaturity of the OpenStack is well established.”
Gelsinger declined to say much about how the looming acquisition of VMware by Dell is playing out. Customers were initially fascinated and a bit fretful, he said, but concerns have now become “a question rather than the question.”
Overall, VMware feels like it's started 2016 really well. The plan to manage declining vSphere revenue with growth in NSX, VSAN and end-user computing looks to be working. The company knows it has a challenging Q2 ahead, as there are plenty of licence renewals on the table.
But overall the company is in rude health, so rude it is putting $1.2bn of its $8bn cash and short term investments into a share buy-back. That plan should make shareholders happy regardless of whether they buy or stick, as the diminished pool of shares in the market after the repurchase will score inflated dividends. ®