EMC animates franken-cloud with bits of itself, VMware, VCE and Virtustream

VMware beats the street, flings vCloud Air into new joint venture

VMware has revealed its full Q3 2015 results, and they're pretty: US$1.7bn revenue and net income of $1.02 per share were both a tick over the guidance the company has offered to markets.

Virtzilla's future results will also receive a boost, because EMC's US$1.2bn acquisition of Virtustream will end as a 50/50 joint venture with EMC.

Virtustream emerges as an EMC Federation Business that includes vCloud Air, VCE Cloud Managed Services, Virtustream's Infrastructure-as-a-Service, and EMC’s Storage Managed Services and Object Storage Services.

In Tuesday's earnings call, VMware CEO Pat Gelsinger said he expects the new company will make an appreciable improvement to VMware's bottom line. He's on the Board, with cloudfather Joe Tucci as chair. Rodney Rogers gets the CEO's chair, having already served in that role at Virtustream.

The re-shaped Virtustream is aiming squarely at hybrid clouds: Gelsinger reckons the re-arranged company will accelerate the Federation's hybrid sales which should mean more cash for VMware than if it pushed its hybrid wares alone. Virtustream's expected to record a loss of $200 million to $300 million in 2016, but financial gymnastics mean VMware expects “... a benefit to net income and earnings per share” according to chief financial officer Jonathan Chadwick.

The CFO also said that “We anticipate the continuing shift to hybrid cloud and SaaS, including the effect of the new hybrid purchasing program, will negatively impact total revenue growth by at least 3 percentage points in 2016.”

Other parts of VMware's business remain strong.

“License bookings beyond stand-alone vSphere were greater than 60 per cent of total license bookings, up from greater than 50 per cent in Q3 2014, and up from more than 40 per cent two years ago,” Chadwick said. “Q3 total revenues were $1.7 billion, up 14 per cent year-over-year on a constant currency basis, or up 10 per cent as reported. Q3 license revenues were $681 million, up 11 per cent year-over-year on a constant currency basis, or up 7 per cent as reported.

Chadwick also said hybrid cloud and SaaS now brings in six per cent of VMware's revenue, and has grown at over 50% year-over-year. As you'd expect. Some Vmware-watchers wonder how much of that is vCloud Air and how much comes from acquired offerings like AirWatch-as-a-service. VMware's not saying, but has announced three new regions for hybrid cloud bit barns (Texas, New Jersey and Virginia) and says they're needed to meet customer demand. So perhaps vCloud Air is doing well.

The company has $7.22bn in cash or easy-to-grab assets and unearned revenues of $4.69bn it knows will arrive in the future.

NSX and VSAN, two new-ish product lines for VMware, both got a mention for doing well. The company's UK operation also scored a name-check, but for the wrong reasons because it “did not grow as robustly as it had earlier in the year.” Russia, Brazil and China remain problematic.

VMware's predicting it will land 2015 with non-GAAP revenue of between US$6,605bn and $6,655bn, after a Q4 in which it expects $1.825bn to $1.875bn to arrive. At the top end of both ranges, and after taking into account currency fluctuations, that would represent 13 per cent growth. Which is a pretty number.

In the earnings call, all execs expressed confidence Dell will kick things even higher in future. Whether that's true is the $67bn question. ®

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