Strong Results From VMware and EMC Corp.

Until the last quarter, VMware (VMW) was facing trouble. In these times when most companies are reporting rather depressing results, both VMW and its parent company, EMC’s results were a pleasant surprise.

VMWare’s Revenues for the quarter of $472 million exceeded the market’s expectations of $463 million and reported a 32% annual growth and a 4% sequential growth. EPS for the quarter stood at $0.24, beating the street’s expectations of $0.20 and growing by $0.01 over the previous year and the previous quarter.

US revenue increased 24% over the year to $249 million and International revenue grew 42% to $224 million. The company saw significant opportunities in Japan, Korea and Germany and are looking at geographical expansion in the future in Asian markets.

In response to the economic conditions, the company noted that its customers were cautious of their capital budgets and in some cases were opting for immediate needs and letting go of larger discounts offered by enterprise license agreements.

To manage the recession, the company is looking at controlling revenue expenses, managing product delivery and creating strategic frameworks to guide their efforts going ahead. Despite Microsoft’s (MSFT) entry into the Hypervisor market, the company did not see any major losses to it. The company is confident that Microsoft will take another year or so to catch up with its current product range.

The company is working on evolving its virtual infrastructure product line into a fully virtual data center operating system. The company also announced a joint development with Teraichi for the development of a new protocol to provide efficient traffic between the server environment and its end client environment.

The stock had slipped to an all time low of $18.30 late last week, but has recovered substantially since to trade at $28.22. The company was once deemed as the next Google (GOOG).

Like VMW, its parent, EMC Corp. (EMC) also had a solid quarter. Revenue for the quarter grew by 13% over the year to $3.7 billion and EPS recorded a growth of 14% to reach $0.19. While the revenues were in line with the market’s expectations, the earnings exceeded the street’s expectations by $0.01.

Segment wise, Information Infrastructure revenues grew by 10% to $3.2 billion. Content management and archiving business revenues were flat while RSA revenues grew by 11% over the year.

The company also experienced strong demand in the non-U.S. markets of the Middle East, Eastern Europe and Latin America. However, China was slower due to the Olympics and the earthquake in the region.

Like others, the company is also looking at adopting a leaner cost structure through back office and infrastructure expense management and controlling areas of its businesses which have low productivity or high costs.

During the quarter, the company spent $433 million to repurchase 31 million shares.

Going forward, the company expects revenues of $4 billion in the next quarter with EPS of $0.23-$0.24.

The company is hopeful that in the challenging conditions, customers will continue to spend on risk and compliance, for which their diversified product range offers solutions.

The stock had slipped to a new two-year low of $8.35 last week, but has recovered since, and at the time of writing, was trading at $10.51. It is still quite a bargain, especially if the market stabilizes.

Disclosure: None