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VMware Sales Climb Thanks to New Software

April 19, 2016, 8:35 PM UTC
CA: Companies In Silicon Valley
A logo sign at the headquarters of VMware, Inc., in Palo Alto, California on December 6, 2014. Photo Credit: Kristoffer Tripplaar/ Sipa USA *** Please Use Credit from Credit Field ***
Photograph by Kris Tripplaar/Sipa USA/AP

VMware reported a better-than-expected rise in quarterly revenue as strong growth in its newer software offerings more than offset declining demand for its traditional server-virtualization software.

The company also said it plans to repurchase $1.2 billion of its Class A common stock this year, which helped boost its shares 3.7% in after-hours trading on Tuesday.

VMware has been struggling on multiple fronts, with falling PC sales lowering demand for its flagship vSphere software, which helps companies cut costs by running multiple operating systems on a single machine.

Like other technology providers, it is also striving to keep pace with customers’ shift to the cloud, while fending off stiff competition.

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As a result, license sales of VMware’s vSphere has fallen for the last two years.

To offset the declines, VMware launched new virtualization offerings such as NSX and vSAN in 2013. NSX makes networking more efficient and vSAN helps businesses scale storage capacity.

That helped the company’s revenue rise 5.2% to $1.59 billion in the first quarter ended March 31 and beat analysts average estimate of $1.58 billion, according to Thomson Reuters.

Net income fell to $161 million, or 38 cents per share, from $196 million, or 45 cents per share.

Excluding items, the company earned 86 cents per share, beating average analysts’ estimate of 84 cents.

VMware’s parent EMC is being acquired by Dell. Shares of EMC, which reports results on Wednesday, were up 0.9% at $25.78 after VMware’s results.