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VMware’s incoming CEO promises to change ... almost nothing

And why would he change when quarterly revenue just cracked $3bn for the first time?

VMware’s incoming CEO Raghu Raghuram has outlined his plans for the company on its Q1 2022 earnings call, essentially promising more of the same – but even better once the virtualisation giant is spun out of Dell.

Raghuram starts work as CEO on June 1st and used the earnings call to offer a virtual log cabin story of his 18 years at the company and parallel evolution from offering a hypervisor and not much else to now building software that lets users run and manage anything on any device or cloud, all inside a single logical construct.

The incoming CEO said he is “passionate about … accelerating our innovation to drive the industry-leading multi-cloud computing portfolio that best serves our customers and accelerating our business model to support our customers' preference for subscription and SaaS. Raghuram added that he expects VMware “will seize the tremendous opportunity in multi-cloud platforms that will power an exciting new phase of growth.”

Many of Raghuram’s remarks concerned “post spin” VMware – a reference to Dell’s sale of its majority stake in the virtualisation giant, rather than an intention to hose out VMware’s PR department.

“Post spin, we will be the only standalone cloud company that has the necessary strategic partnerships with all the major cloud companies and all the leading infrastructure companies to deliver on a truly customer-centered multi-cloud vision,” Raghuram’s said, using language that suggests the PR team is very much engaged.

The incoming CEO also backed the blather with an anecdote about a customer in the banking sector that analysed 900 applications it runs in public clouds. “They found all 900 of them were multi-cloud in the sense they had components in the public cloud, in the private cloud and in some other clouds because these applications by themselves are distributed.”

“And the problem they're trying to solve is, how do I secure an application that's spread out like this, right?”

Solving that, Raghuram intimated, is where VMware can help.

He also offered a little more insight into VMware’s future relationship with Dell.

“The partnership with Dell is today, clearly around a bunch of technology areas that we have spoken to you about, such as VxRail, VMware Cloud and Dell, VeloCloud, et cetera, SD-WAN, etc.” he said.

“Going forward, we have 15 statements of work on fundamental areas of differentiation where together, we can deliver a powerful solution for our customers. And that's going to be backed by our commercial agreement to work together in the field in service of our customers.”

CFO and interim CEO Zane Rowe revealed VMware’s results for Q1 2022: revenue was $3 billion, up 9 percent from COVID-confused first quarter of FY '21.

Subscription and SaaS revenue grew 12 percent year-over-year to $1.387 billion for the quarter. Annual run rate for subs and SaaS hit $3 billion, 30 percent year-over-year growth.

VMware Cloud on AWS starred, with growth of “over 80 percent in Q1.” Raghuram said VMware has seen “some good momentum -- early momentum” for the Azure VMware Solution.

“Core software-defined data centre product bookings increased over 20 percent year-over-year, with compute increasing over 20 percent and cloud management up in the high teens,” Rowe told investors.

We have quietly built quite a significant population of developers that are using Tanzu technologies

In 2015 VMware said compute sales – essentially vanilla server virtualisation – were set for long term decline in a mature market, and that its VSAN virtual storage and NSX networking products would pick up the slack. Yet in this quarter VSAN and NSX went backwards year on year.

Rowe had the happy duty of raising VMware’s full-year forecast to “approximately $12.80 billion or a growth rate of approximately 9 percent year-over-year.”

Most of Raghuram’s remarks focussed on multi-cloud, but Keith Bachman, an analyst BMO Capital Markets, asked a pointed question about the progress of VMware’s Kubernetes-centric Tanzu portfolio which he described as “an important beacon for the durability of the overall portfolio”..

Raghuram acknowledged that Kubernetes has become the de facto standard for application deployment and stated that Tanzu was present in half of VMware’s top ten deals for the quarter.

He added that five million developers use VMware’s Spring framework and another two million employ its Bitnami app marketplace.

“So we have quietly built quite a significant population of developers that are using Tanzu technologies to modernize their applications,” he said. ®

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