This Is VMware’s Next Billion Dollar Business
A key product from business software giant VMware is on track to bring in $1 billion this fiscal year, chief executive Pat Gelsinger said on Thursday.
The product, NSX, announced three years ago, pools networking hardware like routers and switches and allows them to be reconfigured and managed via software. Customers who use the product or rival software don’t need to buy new hardware as their needs change as had been the case in the path. NSX is an outgrowth of VMware’s $1.26 billion acquisition of Nicira in 2012.
Last year, VMware said NSX, was on track to be a $600 million business, so it’s on a good trajectory, according to VMware.
During the quarter, VMware (VMW) also closed a single $10 million NSX deal—its largest ever, Gelsinger said during the company’s fourth quarter earnings call on Thursday. He did not name the customer.
NSX is sold in a bundle with other VMware products including VMware Cloud Foundation which lets companies run applications across data centers and clouds. And it will be part of the upcoming VMware cloud on AWS that will enable customers to run VMware-based applications on Amazon (AMZN) Web Services public cloud.
Because NSX is sold as a bundle, it’s difficult to get a clear view of its sales.
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Gelsinger deflected when asked when NSX may pass the $2 billion annual sales mark. Instead, he said that the opportunity is bigger than ES and VMware, software that lets companies cram more than one application onto a single server—thereby saving money.
“We see greater potential strategic opportunity in NSX over the next decade than our franchise product vSphere has had for the past decade,” he added.
VMware’s net income for the quarter was $441 million or $1.04 per share. Adjusting for one-time charges and gains, profit was $1.43 per share, beating estimates $1.39 per share.
The company also disclosed plans for a $1.2 billion for a stock repurchase that will run through the end in February 2018.
“We think there are good targets around us so along with buybacks we’ll use cash for M&A,” he said.
VMware shares have risen 7% since the new year. At market close Thursday per share price stood at $84.22 up 71% over the past year.