VMware (VMW) Scraps Q1 & Fiscal 21 View On Coronavirus Woes

VMware (NYSE:VMW) in an 8K filing on Mar 26 announced the withdrawal of its first-quarter and fiscal 2021 guidance provided on Feb 27. The company cited uncertainty about the impact of the coronavirus spread on its business operations behind the withdrawal.

VMware joins a long list of technology companies including bigwigs like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Twitter who either withdrew their guidance or warn of lagging expectations due to the coronavirus pandemic.

Notably, for the fiscal first quarter, this Zacks Rank #5 (Strong Sell) stock projected total revenues to be $2.73 billion, suggesting 11.4% year-over-year growth. Moreover, non-GAAP earnings were expected to be $1.27 per share.

Further, for fiscal 2021, VMware anticipated total revenues to be $12.050 billion. Additionally, non-GAAP earnings were expected to be $6.55 per share.

Markedly, the Zacks Consensus Estimate for earnings in the fiscal first quarter has declined 3.1% to $1.23 per share in the past week. The consensus mark for fiscal 2021 fell 2.6% to $6.38 per share.

VMware shares have been down 17.8% on a year-to-date basis, underperforming the industry’s 4.4% decline.

Year-to-Date Performance

Will Solid Partner Base & Strong Portfolio Aid VMware?

Apart from instability related to the coronavirus outbreak, VMware’s underperformance can be attributed to an unfavorable revenue mix. Moreover, margins are anticipated to be under pressure due to the ongoing investments in hybrid cloud and SaaS portfolio expansions. Additionally, the Carbon Black and Pivotal acquisitions are expected to dent the operating margin in fiscal 2021.

Nevertheless, VMware’s solid partner base and the expanding portfolio supported by acquisitions are expected to drive the top line in the long haul.

VMware’s partnerships with the likes of International Business Machines (NYSE:IBM) , Amazon’s (NASDAQ:AMZN) cloud computing arm AWS, Microsoft Azure, Google (NASDAQ:GOOGL), Oracle (NYSE:ORCL) and Alibaba (NYSE:BABA) are helping it expand its customer base in the cloud space.

Furthermore, the addition of Carbon Black solutions equips VMware’s existing security portfolio to provide deep protection across infrastructure, applications and endpoints.

Moreover, the Heptio and Pivotal acquisitions combined with the VMware Cloud native offerings make up the Tanzu, a portfolio of products and services designed to transform the way enterprises build, run and manage application software. VMware aims to simplify the use of Kubernetes in a multi-cloud environment by offering this solution.

Nyansa enables VMware to deliver an end-to-end network visibility monitoring and remediation solution within VMware SD-WAN. Addition of Nyansa’s AI & machine learning capabilities to VMware’s existing network and security portfolio will further strengthen the company’s efficiency to enable self-healing networks.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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