VMware 3Q profit slips as expenses rise
PALO ALTO, Calif. (AP) — VMware Inc. said Tuesday that its third-quarter earnings fell nearly 12 percent as the software company's revenue growth didn't keep pace with rising expenses.
VMware also named a new chief financial officer, appointing tech industry veteran Jonathan Chadwick to replace Mark Peek, who left in June.
VMware helps businesses save money on power and equipment by providing "virtualization" software that allows one computer to function as multiple machines. VMware stands to benefit from the larger trend toward moving information to virtual or "cloud" environments.
The Palo Alto, Calif., company reported net income of $156.8 million, or 36 cents per share, for the July-to-September quarter, down from $177.5 million, or 41 cents per share, in the same quarter a year ago.
Excluding stock-based compensation and other one-time items, the company reported adjusted earnings of $303.4 million, or 70 cents per share.
Analysts expected adjusted earnings of 63 cents per share, on average, according to FactSet. Analysts' estimates typically exclude one-time items.
Revenue rose 20 percent to $1.13 billion, which matched analysts' expectations.
Revenue from services, such as software maintenance and professional services, jumped 29 percent to $642.6 million. License revenue grew at a slower pace, increasing 11 percent to $491.1 million.
Operating expenses increased 24 percent, to $943 million. VMware's largest source of expenses, sales and marketing, grew 24 percent, while its second-largest, research and development, jumped 30 percent.
VMware reported third-quarter results after its shares rose 36 cents on Tuesday to close at $83.72. In after-hours trading, the stock added $2.06, or 2.5 percent, to $85.78.
Incoming CFO Chadwick, 46, recently served as corporate vice president of Microsoft Corp. and CFO of Skype. He also previously worked for McAfee and Cisco Systems.
Peek left VMware to join software company Workday.