VMware Inc (NYSE:VMW) Information Technology - Software | Reports April 19, After Market Closes
Key Takeaways
- The Estimize consensus is calling for EPS of $0.85 on $1.58 billion in revenue, 1 cent higher than Wall Street on the bottom line and $10 million on the top
- VMware is an industry leader in virtualization products, best known for its flagship product, the vSphere hypervisor
- VMware faces a number of near term risks including stiff competition, soft IT spending and economic uncertainty in some of its key markets
- What are you expecting for VMW?
Over the past 5 years, cloud computing has been one of the fastest growing industries as consumers shift away from licensed based subscriptions to cloud based services. At the moment, cloud computing consists of three major components; platform as a service (PaaS), software as a service (SaaS) and infrastructure as a service (IaaS). One of the leaders in SaaS, VMware is scheduled report first quarter earnings Tuesday , after the closing bell. VMware is primarily known for its flagship product, the vSphere hypervisor, which has the leading market share in x86 server virtualization.
Despite steadily growing earnings and revenue, expectations have been generally low for VMware. Ahead of earnings, the company is seeing heavy downward revisions. Per share earnings estimates have been cut by 10% while sales have fallen 4% over the past 3 months. As a result, the Estimize consensus has been pushed down to $0.86 on the bottom line and $1.59 billion in revenue, 1 cent and $10 million higher than Wall Street. By comparison, VMware is forecasting relatively flat year over year comparisons with EPS essentially unchanged.
In the past 12 months, Wall Street has reacted negatively to VMware, with shares falling 37.8%. VMware faces a number of near term risks including stiff competition, soft IT spending and economic uncertainty in some of its key markets. Currently, the company operates in the same environment as Microsoft (NASDAQ:MSFT), Citrix Systems Inc (NASDAQ:CTXS) and Amazon (NASDAQ:AMZN). Staunch competition has initiatived a pricing war within the industry, effectively marginalizing profits and margins. Meanwhile, VMware is seeing slower uptake on new products, continued decline in sales of its core products and uncertainty around the Dell/EMC deal has created near term headwinds.
On the brightside, VMware is well positioned to leverage its leading position in the virtualization market to other markets such as data centers, hybrid cloud and mobile devices. These three markets will likely be the fastest growing segments in cloud computing over the next several years. VMware also continues to form strong partnerships and ended 2015 with relationships with Samsung Electronics (KS:005930) Co Ltd (OTC:SSNLF) and Google (NASDAQ:GOOGL).
Do you think VMW can beat estimates?