Oct. 22, 2013, 9:36 AM
- Even as 80%-owned VMware flies higher thanks to its Q3 beat and guidance/CC remarks, EMC (EMC -4.8%) is lower after missing Q3 estimates thanks to a rough quarter for its core storage business. Full-year EPS guidance has been lowered to $1.80 from $1.85 (consensus is $1.86). NetApp (NTAP -2.2%) is off in sympathy.
- EMC's core Information Storage unit had 1% Y/Y sales growth vs. 4% in Q2. Product sales were down slightly, services +3%. While emerging storage sales (inc. Isilon, Atmos, flash storage) rose 66% Y/Y to $380M, high-end storage sales (Symmetrix) -8% to $1.05B, unified & backup/recovery (inc. mid-range hardware) +3% to $1.47B, other storage -6% to $880M.
- The RSA security unit was a bright spot, sales +11% to $250M. EMC and VMware's Pivotal spinoff, set to go public, had revenue of $80M (+21% Y/Y).
- Thanks in part to VMware, North American sales +3%, EMEA +8%, Asia-Pac +8%, Latin America +13%. EPS was boosted by $1B in buybacks. Gross margin was 63.9%, -20 bps Y/Y.
- A major question likely on investors' minds: how much of the storage weakness is due to a demand shift towards cloud infrastructure providers and Internet giants relying on some combo of commodity and flash hardware?
- Q3 results, PR, slides
Oct. 22, 2013, 7:13 AM
Oct. 22, 2013, 12:05 AM
Oct. 21, 2013, 5:49 PM
- VMware (VMW) guides on its Q3 CC for Q4 revenue of $1.45B-$1.48B, largely below a $1.48B consensus. However, license growth is expected to remain healthy, rising 12%-16% Y/Y after accelerating to 15% in Q3
- In addition, VMware now expects 2013 operating cash flow of $2.3B-$2.5B vs. prior guidance of $2.1B-$2.35B.
- The company does expect its Q1 2014 Q/Q revenue and license revenue drops to be 100 bps greater than the drop it saw in Q1 2013. However, full-year revenue is still expected to grow 15% Y/Y vs. a 14.5% consensus.
- VMware also mentioned its bookings were strong in all three major geographies, including Asia-Pac, where peers have stumbled. Costly enterprise license agreements (ELAs) now account for 1/3 of total bookings, and over 40% of bookings involved something besides standalone vSphere licenses, up from 35% in Q2 and 30% a year ago.
- End-user computing (PC virtualization, mobile software) bookings fell slightly Y/Y after rising at a mid-teens rate in Q2. That could be a sign Citrix's (CTXS) troubles are due to broader demand weakness.
- VMW now +8.3% AH. IBM and Citrix had led investors to expect bad news. EMC +4.5%. JPMorgan's upgrade was well-timed.
- Q3 results, details
Oct. 21, 2013, 5:30 PM
Oct. 21, 2013, 4:21 PM
- VMware's (VMW) Q3 license revenue (drives future services revenue) rose 15% Y/Y to $564M. That's well above Q2's 2.6% growth, and also guidance for 9%-13% growth. Services revenue +13% to $725M.
- Total revenue growth was 14%, or 19% if excluding assets that were either sold or are part of the Pivotal spinoff. VMware's unearned revenue balance rose 21% Y/Y to $3.64B. That's one reason free cash flow rose 50% Y/Y to $543M, easily surpassing net income of $261M.
- R&D spend only rose 2% Y/Y to $266M, thanks to restructuring moves. Sales/marketing +9% to $449M.
- Guidance will be provided on the CC (starts at 5PM ET).
- VMW +4% AH. EMC also +4%. EMC reports tomorrow morning.
- Q3 results, PR
Oct. 18, 2013, 4:22 PM
- JPMorgan's John DiFucci, who upgraded VMware (VMW +3.4%) to Overweight this morning, observes the percentage of x86 server CPU capacity being used to power virtualized servers (34%) is well below the percentage of x86 server workloads that have been virtualized (75%).
- While the latter figure (or similar ones) has been used to back up arguments the virtualization software market has become saturated, the former one is arguably more relevant to VMware, given the company charges for its mainstay vSphere virtualization platform on a per-CPU basis.
- VMware shares were pressured earlier this year in large part due to concerns about slowing vSphere license growth. Aside from saturation, investors have also been on edge about share losses to Microsoft's Hyper-V (recently declared by Microsoft to be growing 3x as fast as vSphere).
- Both VMware and parent EMC (EMC +1.9%) got a lift from the upgrade. VMware shares remain down 14% YTD going into Monday's Q3 report.
Oct. 18, 2013, 1:36 PM
- Nimble Storage, a provider of hybrid storage appliances that pair flash memory and hard drives, has made good on rumors by filing for a $150M IPO under the symbol NMBL. Goldman, Morgan Stanley, Pac Crest, William Blair, Stifel, Oppenheimer, and Needham are underwriting. (S-1)
- Nimble asserts its CASL architecture, built to address hybrid appliance needs, offers better performance than traditional systems that offer flash as a caching option (e.g. EMC's VNX, NetApp's (NTAP) FAS line). CASL is also said to support the independent scaling of storage performance and capacity.
- Nimble had revenue of $50.6M in the six months ending July 31, +164% Y/Y. Net loss totaled $19.7M, thanks to 100%+ increases in sales/marketing ($31.4M) and R&D ($14.4M) spend. Nimble had 1,750+ cumulative customers as of July, up over 3x Y/Y, and 600+ resellers.
- Competition is provided both from incumbents such as EMC, NetApp, H-P, Cisco, and IBM, many of whom have been busy acquiring flash startups, and from smaller firms such as Fusion-io (FIO +2.3%), Violin Memory (VMEM +0.8%), and Nimbus Storage. Violin, which is seeing slower growth and much bigger losses than Nimble, recently turned in a disappointing IPO. Fusion-io entered the hybrid appliance in April by acquiring NexGen Storage.
Oct. 16, 2013, 7:03 PM
- IBM's $1.07B Q3 revenue miss, caused in large part by a 15% Y/Y drop in Asia-Pac sales and a 17% decline in hardware sales, (including a 40% drop for hardware sales to China), is pressuring several enterprise IT peers a bit in AH trading.
- IBM's numbers come two days after Teradata warned of a major Q3 decline in Asian sales. The hardware figures will likely stoke additional concerns about share losses by IBM and peers to white-label OEMs selling to major Web/cloud service providers.
- HPQ -0.8% AH EMC -0.9%. VMW -0.5%. RHT -0.6%.
Oct. 15, 2013, 10:05 AM
- A week after some of them temporarily fell in response to Citrix's warning, enterprise IT names are slumping on account of Teradata's Q3/2013 warning, which was largely the result of weaker-than-expected Asian numbers.
- Three other data warehousing/business intelligence software providers - Informatica (INFA -4.4%), MicroStrategy (MSTR -4.1%), and Qlik (QLIK -3.3%) are among the biggest decliners. The companies rallied in August in response to Teradata's better-than-feared Q2 report.
- Other decliners: EMC -1.8%. NTAP -2.1%. CVLT -2.5%. FFIV -2%. JIVE -2.2%. NOW -2%.
- Teradata isn't alone among enterprise IT names in seeing its Asian ops underperform. Cisco and Oracle have reported similar issues.
Oct. 9, 2013, 4:26 PM
- Citrix (CTXS) expects Q3 revenue of $710M-$712M, below a prior guidance range of $730M-$740M and a $737.3M consensus. EPS guidance has been lowered to $0.68-$0.69, below a prior $0.72-$0.73 and a $0.73 consensus. (PR)
- The thin client/virtualization software and application delivery controller vendor doesn't give a reason for the shortfall. Full Q3 results arrive on Oct. 23.
- CTXS -11.1% AH. Off in sympathy: RHT -2.2% VMW -4.4%. EMC -1.5%. FFIV -4.3%.
Oct. 2, 2013, 4:01 PM
- EMC and VMware's (VMW) Pivotal spinoff has acquired Xtreme Labs, a developer of mobile apps for Facebook, Twitter, Groupon, Microsoft, and many others. AllThingsD reports the purchase price was $65M.
- Pivotal, which is prepping an IPO, already offers a variety of software tools and services for developing Web/cloud apps. With many, if not most, of the company's clients already working on mobile apps, there should be plenty of cross-selling opportunities.
- Before GE bought a 10% stake for $105M, EMC owned 69% of Pivotal, and VMware 31%.
Sep. 28, 2013, 2:40 PM
- John Chambers (CSCO): "We do everything in wireless except for the radio ... Now, we have a creative idea there, and I’ve just funded our first startup to see if that works ... The market is ripe for a new player."
- Chambers won't name the startup, but his remarks suggest Cisco plans to directly take on Ericsson (ERIC), Nokia (NOK), and Alcatel-Lucent (ALU) in the giant mobile base station market. Cisco recently bought small cell base station vendor Ubiquisys, and also sells switches/routers and management software to mobile carriers, but until now has argued the core base station market is too commoditized.
- Separately, Chambers predicts "IT as a service and white label will be [Cisco's] biggest competitors three to five years out." That's a reference to cloud infrastructure providers (none larger than Amazon), who often rely on cheap white-label switches, as well as the use of similar hardware from Web giants such as Facebook and Google.
- Chambers also: 1) Insists Cisco's storage alliances with the likes of EMC and NetApp (NTAP) will stay in place, in spite of the Whiptail deal. 2) Predicts Cisco's upcoming Insieme switches will help it compete against private Arista. Arista, whose high-density switches use 3rd-party silicon (unlike Cisco's), could do a huge IPO next year. 3) Questions the scalability of the software-defined networking platform offered by VMware's (VMW) Nicira unit (generally seen as a threat), and claims Nicira has less than $10M worth of deployments. Of course, the value of the switches managed by Nicira's products could be much larger.
- Previous: Cisco lower, Chambers cautious about macro trends
Sep. 27, 2013, 12:35 PM
- EMC (EMC -0.4%) is creating an Emerging Technology Products unit that features the company's XtremIO flash storage systems, XtremSF server flash cards and XtremSW flash caching software, and hybrid cloud gateway and high-performance computing (HPC) storage products.
- The Register's Chris Mellor observes EMC doesn't technically offer either of the last two product types right now. The closest EMC comes is a Cloud Tiering Appliance for migrating inactive data, and a pre-configured mid-range VNX storage system meant to work with HPC systems from private Terascala.
- The Register's EMC sources indicate the unit "will run itself like a set of start-ups," and feature "businesses which are just starting out and are not producing substantial revenue."
- EMC has hired C.J. Desai, until now the head of Symantec's (SYMC -0.5%) Information Management unit (covers a variety of storage management software), to run the division. Information Management accounted for 37% of Symantec's June quarter revenue, and saw 4% Y/Y sales growth.
Sep. 27, 2013, 9:23 AM
- Though Nasdaq futures are lower, Microsoft (MSFT) is up 0.6% premarket following Kara Swisher's report about Ford's Alan Mulally now heading the software giant's list of potential Steve Ballmer replacements.
- In an update to her original report, Swisher adds that in addition to Mulally and Stephen Elop, Skype chief Tony Bates is a top CEO candidate, and Paul Maritz, head of EMC and VMware's (VMW) Pivotal spinoff (and formerly VMware's CEO), has been contacted. Also, Bill Gates (on the special committee) is said to be spending more time at Microsoft lately.
- Separately, The Verge reports OS chief Terry Myerson wants to combine Microsoft's Windows and Windows Phone app stores following OS updates due in Spring 2014. He didn't disclose whether apps written for one platform would work on the other.
- Ballmer held his last annual employee meeting yesterday, bidding co-workers a tearful farewell.
Sep. 24, 2013, 12:50 PM
- Several enterprise IT names are lower after Red Hat reported weaker-than-expected Aug. quarter billings and issued soft top-line guidance yesterday afternoon, and Red Hat, EMC (EMC -1.2%), NetApp (NTAP -0.5%), and F5 (FFIV -2.2%) were hit with downgrades this morning.
- Notable decliners include Citrix (CTXS -2.6%), VMware (VMW -1.9%), SolarWinds (SWI -2.1%), Teradata (TDC -2.1%), CommVault (CVLT -2.1%), and Radware (RDWR -2.4%). Red Hat partly blamed its performance on weak European demand.
- Barclays' Ben Reitzes suggests his downgrades of EMC and NetApp are partly valuation calls (both companies are near his PTs). But he adds "there may be more upside in networking names today" in light of "long-term headwinds to storage demand." The growth of cloud infrastructure platforms relying on commodity hardware (AWS being the most notable) is generally viewed as a threat to storage incumbents.
- William Blair cut NetApp to Underperform last week, raising concerns about executive departures, a flash memory-focused refresh to EMC's VNX mid-range storage line, and the Cisco-Whiptail deal.
- Goldman's Kent Schofield, who cut F5 to Neutral, says he thinks Street estimates now take into account F5's application delivery controller (ADC) refresh cycle and Cisco ADC displacements.
EMC vs. ETF Alternatives
EMC Corp supports the businesses and service providers to transform information technology (IT) operations to an as a service model (ITaaS). It operates in three segments: EMC Information Infrastructure, Pivotal and VMware Virtual Infrastructure.
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