VMware has cracking Q2, explains how it will beat Azure Stack

vSphere sales forecast changed from long-term-decline to long-term-flat

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VMware's delivered the market-beating second quarter it foreshadowed last week, hauling in US$1.90 billion of cash and GAAP net income of $334 million, both ahead of forecasts.

VMware's long had a strategy to create new growth businesses in the expectation its core server virtualization products would wane due to a combination of market saturation and changing needs. Yet in this quarter sales of what VMware calls “compute” rose by about ten per cent. CFO Zane Rowe said the company has had to revise that forecast in the nicest possible way, saying “our multi-year outlook for this business has increased. We now expect total compute bookings to grow in the low single digits with compute license bookings flattish over the next few years.”

But he was at pains to point out that “Even with the stronger outlook for compute over the next few years, we continue to expect our emerging products to represent a larger portion of our license bookings.”

Among those emerging products is Workspace ONE, the digital workspace tech VMware says scored EUC license bookings up over 20 per cent year-over-year.

CEO Pat Gelsinger is happy with other new products, too, saying “We continue to be pleased with the adoption of NSX. We believe NSX inclusion in all of our top 10 deals this quarter is a strong indication that the market is standardizing on VMware NSX to transform datacenters.”

License bookings grew by more than 40 per cent. The hyperconverged VSAN saw licences soar by over 150 per cent year-over-year and cracked the 10,000 user barrier, up from 2,000 last quarter. Cloud management bookings rose double digits.

Cloud management growth was modest, although the vCloud Air Network of service providers running vSphere-powered clouds was mentioned as delivering “30 plus per cent” growth.

The call also offered a couple of hints about VMware's future directions, including work on the internet of things, including a project with Fujitsu and Toyota “to build a next generation in-car platform.” As Toyota's already tried automotive grade Linux and the group behind that effort recently announced its intention to shop for a hypervisor to power in-car virtual machines, things could get interesting!

One thing sure to make VMware's life interesting is Microsoft's Azure Stack, which looks a potent challenge to current hybrid clouds.

Asked to “compare and contrast the architecture and also the philosophy of VMware cloud on AWS relative to Microsoft approach with Azure and Azure Stack”, Gelsinger said of Azure Stack that it is “asking customers to fork or create heterogeneity in their on-premise environment just to take advantage of some services that they may want to consume from Microsoft.”

He characterised that approach as the opposite of VMware's plan to have its wares extend into clouds that look and feel exactly like on-premises implementations.

It's widely believed that VMware will offer details of its AWS deal at next week's VMworld USA. The Register expects that between the debut of AppDefence and cloudy NSX, the company will be able to demonstrate a plan to increase cloud management revenue in the future, along with new sources of the subscription revenue investors look for as vendors that grew fat selling on-premises licences get SaaSy.

The Register will attend VMworld USA, as a guest of VMware, so will bring you all the news fit to print. And then some besides. ®


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