Virtualization software maker VMware Inc (VMW) on Tuesday reported a 3 percent decline in profit for the fourth quarter from last year, as higher costs more than offset double-digit growth in revenue.
However, both revenue and adjusted earnings for the quarter beat analysts' expectations. VMware also said its board has authorized the purchase of up to $1 billion of its common stock through the end of 2017.
Jonathan Chadwick, chief finance officer and chief operating officer of VMware said, "We are very pleased with our Q4 revenue growth of 16% on a constant currency basis and with our 2014 results, which met or exceeded our revenue and operating margin guidance for the quarter and the year. Our portfolio of new disruptive products and services is experiencing significant customer momentum and driving strong growth into 2015."
Palo Alto, California-based VMware, majority-owned by EMC Corp. (EMC), said its net income for the fourth quarter was $326 million or $0.75 per share, down from $335 million or $0.77 per share in the same period last year.
Excluding items, adjusted earnings for the quarter were $1.08 per share, compared with $1.01 per share in the year-ago period. On average, analysts polled by Thomson Reuters estimated earnings of $1.07 per share. Analysts' estimates typically exclude special items.
Total revenues for the quarter grew 15 percent to $1.70 billion from $1.48 billion in the prior-year period. Analysts had a consensus revenue estimate of $1.69 billion for the quarter.
License revenue increased 13 percent from the year-ago period to $777 million, while services revenue grew 16 percent to $926 million.
However, operating income for the quarter declined 8 percent from last year to $344 million.
For fiscal 2014, VMware's net income declined to $886 million or $2.04 per share from $1.01 billion or $2.34 per share in the prior year. Adjusted earnings for the year were $3.56 per share, compared to $3.37 per share last year.
Revenues for the year rose 16 percent to $6.04 billion from $5.21 billion in the previous year.
Street expected the company to report earnings of $3.54 per share for the year on revenues of $6.02 billion.
VMware board has authorized the purchase of up to $1 billion of its Class A common stock through the end of 2017. The new program is in addition to VMware's ongoing $1 billion buyback announced in August 2014.
The company now expects the stock repurchase program to more than offset dilution from its equity compensation programs in 2015.
VMW closed Tuesday's regular trading at $80.61, down $1.85 or 2.24 percent on a volume of 2.64 million shares. However, in after-hours, the stock gained $1.88 or 2.33 percent to $82.49.
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