) is scheduled to announce its fiscal second quarter 2012 results
after the closing bell on July 23, 2012. In the run up to the
earnings release we noticed some analysts revising their estimates
upward. We note that VMware has outperformed the Zacks Consensus
Estimate in the preceding four quarters by a positive 17.18%. We
expect this trend to continue in the current quarter.
Previous Quarter Highlights
VMware reported robust first-quarter 2012 results. Earnings per
share of 52 cents soared 62.5% year over year and handily surpassed
the Zacks Consensus Estimate by 10 cents. The better-than-expected
results were driven by solid revenue growth and solid margin
Revenues for the reported quarter not only jumped 25.1% year
over year to $1.06 billion, but also moved past management's guided
range of $1.015 billion to $1.040 billion and surpassed the Zacks
Consensus Estimate of $1.03 billion. The upside was primarily
driven by strong Enterprise License Agreement (ELA) growth.
Moreover, strong demand in the international markets, particularly
from the Asia-Pacific region, contributed to the revenue
For further details please read:
VMware Tops Estimates
Estimate Revision Trend
In the last 30 days, four out of the 14 analysts covering the
stock revised their estimates upward and only one downward revision
was noticed. Thus, the Zacks Consensus Estimate for the second
quarter 2012 increased by a penny to 48 cents.
For the second quarter, the revenue estimate as per Zacks
Consensus is $1.12 billion, which is in line with the higher end of
management's guided range of $1.10 billion to $1.12 billion.
Management's revenue guidance reflects an increase of 19.5% to
21.5% over the previous-year quarter.
The company recently released the preliminary result for the
second quarter, wherein the company reported revenue of $1.12
billion, in line with the Zacks Consensus Estimate. Analysts expect
VMware's results to be driven by the continued demand for server
virtualization and cloud computing technologies, as it commands a
dominating position in this area.
Moreover, analysts are optimistic about the prospects of the
company benefiting from the data center upgradation in the near
term. Additionally, the strategic acquisitions made by VMware not
only diversify the company's product portfolio, but also expand
VMware's customer base and market share.
However, on the hindsight, analysts expect the company to face
pricing pressures due to similar virtualization solutions being
launched by competitors like
Citrix Systems Inc.
We believe that VMware's strong and innovative product pipeline
along with its strategic acquisitions will enable the company to
drive its top-line growth over the long term. Moreover, the
company's continued strong performance in international markets and
focus on emerging markets will also be a crucial factor over the
long term, in our view.
However, we believe that sluggish North American and European
markets coupled with modest IT spending environment and competition
from its peers are the headwinds going forward.
We have a Neutral recommendation on VMware over the long term.
Currently, VMware has a Zacks #3 Rank, which implies a Hold rating
on a short-term basis.
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