The VMware Optimism

Upon the completion of the VMworld 2017 conferences in Las Vegas and Barcelona, I found an optimism around VMware. The near-term demand appears to be favorable, and the partner communities are anticipating an acceleration well into 2018. As such, the partners are making go-to-market investments in VMware NSX, VMware vSAN, and the vRealize product suite.

Optimism about VMware also comes in the form of the financials, the revenue guidance laid out for 2018, and the fact that before the start of VMworld Las Vegas, VMware updated and increased the expectations and guidance. VMware has set the expectations and guidance for the third quarter 2018 with a revenue of $1.93 to $1.99 billion, which works out to be a 9% to 11% increase year over year. The license revenue expectation for the same time period is slated to be in the area of $755 to $785 million, a year over year increase of around 9 to 11%. Based on these numbers, the expectation for the earnings per share is in the range of $1.25 to $1.28, which should end up making the shareholders pleased with the results. The guidance for fiscal year 2018 has been set with a revenue of $7.83 billion, a year over year increase of around 10%. License revenue for the year has been set at $3.075 billion, also a year over year increase of around 10%.

Feedback from the conference seems to indicate that demand for VMware products and services is trending in-line or ahead of the plan for the quarter to date, with optimism through the rest of the year. A good number of discussions between VMware partners suggest that they are expecting an increase in booking cloud services, with a focus on VMware NSX, VMware vSAN, and the vRealize product suite. The partners have mentioned these areas as having the best potential for additional growth and opportunities well into next year. VMware partners are expecting the VMware/AWS product availability to provide increased opportunities as well.

Currently, the networking and storage areas of the VMware portfolio continue to outperform, and these areas were called out as one of the main drivers for growth. Taking a closer look at the VMware/AWS product offerings, companies are finding out that there are some prerequisites that will be needed to fully take advantage of the new offering, these being VMware NSX and VMware vSphere 6.5. These prerequisites should help continue the trend of increase in revenue from licenses.

End user compute (EUC) is another area that has some strong interest behind it. Part of that interest comes from AirWatch and the potential for increased growth, based on the company’s announcement of an integrated EUC suite combining AirWatch and Horizon across major operating systems like Office 365, MacOS, ISO, Windows, and Chrome. VMware partners are viewing the consolidation of applications as another area of opportunity for additional growth moving forward.

VMware partners are also talking about Dell’s special announcement to its community that it will be pursuing a distribution strategy for VMware products and services focusing primarily on large enterprise license agreements (ELAs). Rumor has it that Dell will launch the distribution business in several countries at the start and plans on having representation in approximately thirty countries by sometime in 2018. The expectation is for this to be an opportunity for Titanium Dell/EMC VAR partners to be able to purchase VMware licenses via the Dell distribution. Partners have an expectation of much better margins from this new Dell distribution channel verses the current traditional channels.

As we head into the home stretch of 2017, it is clear that this has been a good year for VMware. Now the question is, can VMware keep up the momentum into and through 2018? Indicators seem to indicate that 2018 will be another good year for VMware and its partners—and with that, you have my VMworld 2017 follow-up thoughts.

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