VMWare (VMW) Earnings Report: Q1 2015 Conference Call Transcript: thestreet.com
VMware, EMC Q1 Earnings Raise Spinoff Questions
BY REINHARDT KRAUSE, INVESTOR'S BUSINESS DAILY
04/22/2015 11:52 AM ET
VMware's (NYSE: VMW) Q1 revenue and EPS beat amid weak results at parent EMC could fuel more shareholder pressure for a full spinoff of the leader in software virtualization technology, says BMO Capital Markets.
Palo Alto, Calif.-based VMware late Tuesday reported Q1 revenue of $1.51 billion, up 11% from the year-earlier quarter, edging the consensus estimate of $1.5 billion. Earnings rose 8% to 86 cents a share, 2 cents above expectations.
Data storage system maker EMC (NYSE: EMC) spun off VMware in 2007, retaining an 80% stake. VMware's virtualization software is widely used in corporate data centers. The software enables computer servers to run different operating systems and apps, and share workloads.
EMC on Tuesday cut its full-year revenue and profit forecast, blaming currency exchange rates and a strong dollar, and reported quarterly results that missed expectations.
EMC stock, though, was up 2% in morning trading in the stock market today. VMware stock was up 5%, at a six-month high near 90.
The quarterly results could encourage activist shareholders in EMC, says Keith Bachman, an analyst at BMO Capital Markets.
"We think (results) will raise investor questions, if not ire, about why EMC's management is not taking steps to create more shareholder value by either buying in VMW or, we think more appropriately, spinning out VMW," he said in a research report.
Elliott Management is among the shareholders pressing EMC to spin off faster-growing VMware.
"Although we see no (stock) catalyst until Elliott's standstill agreement elapses in September, we like the company's (EMC) assets," said UBS analyst Steven Milunovich in a report.
Goldman Sachs analyst Heather Bellini on Wednesday raised her price target on VMware to 102 from 92. "We believe its results and affirmation of constant currency guidance for 2015 make the setup for the stock attractive if they can execute well in the June quarter," Bellini wrote in a report.
Brendan Barnicle, a Pacific Crest Securities analyst, in a report said VMware's cloud computing strategy is gaining traction.
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