Virtualization software maker VMware Inc. (VMW: Quote), said Monday its second quarter profit dropped from last year, as higher research and selling expenses as well as the absence of gains recorded last year, offset double-digit growth in revenues. Nonetheless, VMware's quarterly earnings topped Street estimates, while revenues were in line.
Moving forward, VMware detailed its revenue guidance for the third quarter that is indicated to miss or beat Street estimates. The company also lifted its full year revenue guidance.
Separately, VMware agreed to acquire network virtualization company Nicira Inc. for about $1.25 billion in a bid to strengthen its software-defined networking space. The acquisition is expected to close during the second half of 2012.
The virtualization-based cloud infrastructure solutions provider's revenue for the second quarter were up 22 percent, compared to a year ago. License revenues grew 11 percent from last year, and service revenues improved 33 percent. By region, both the U.S. and International revenues gained 22 percent year-over-year.
Palo Alto, California-based VMware reported second quarter net income of $192 million or $0.44 per share, a decline from $220 million or $0.51 per share last year.
Results for the quarter include amortization costs of $20.8 million, among other items. The prior year included a gain of $56 million related to the sale of Terremark Worldwide Inc.
Excluding items, earnings for the quarter were $296 million or $0.68 per share, compared to $235 million or $0.55 per share in the prior year.
On average, 37 analysts polled by Thomson Reuters expected the company to earn $0.66 per share for the first quarter. Analysts' estimates typically exclude special items.
Revenues for the quarter were $1.12 billion, compared to $921 million in the prior year. Thirty-five analysts had a consensus revenue estimate of $1.12 billion for the quarter.
Looking forward, VMware has forecast third quarter revenues of $1.11 billion to $1.15 billion, while analysts currently expect $1.14 billion.
For the full year 2012, the company now estimates revenues of $4.540 billion to $4.635 billion, compared to prior outlook of $4.525 billion to $4.625 billion. Analysts currently expect revenues of $4.59 billion for the year.
Meanwhile, VMware said its $1.25 billion acquisition of Nicira Inc. adds to its portfolio of networking assets and positions the company to be the industry leader in software-defined networking. The acquisition comprises $1.05 billion in cash plus nearly $210 million of assumed unvested equity awards.
According to VMware, Nicira is at the forefront of software-defined networking, which enables the dynamic creation of virtual network infrastructure and services that are decoupled and independent from the physical network hardware.
The acquisition has been approved by the boards of both VMware and Nicira and the stockholders of Nicira.
VMW closed Monday at $82.23, down 0.63%, on a volume of 2.5 million shares on the NYSE. In after hours, the stock dropped $1.39 or 1.56%. In the past year, the stock has traded in a range of $74.69 - $118.79.
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by RTT Staff Writer
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