VMware announces Q1 2010 earnings

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Earlier this week VMware announced its earnings for the first quarter of the year. It is extremely positive, and came with interesting comments that are worth reporting.

Total revenue for Q1 2010 was $634M, up 35% from a year ago.
$312M come from licenses, $267 from software maintenance and support, and $54M from professional services.
The best performance comes from software maintenance and support, grew 52% compared to Q1 2009.

In terms of geography, half of VMware revenue comes outside US, with Europe, China and Japan growing strong and beyond expectations.
VMware closed a 8-figure Enterprise License Agreement (ELA) which netted over $8 million of license bookings   

Total operating expenses, including cost of services and cost of license, increased 2% sequentially to $459M driven largely by increased headcount, the seasonal impact of payroll taxes, and robust set of internal IT initiatives to deliver productivity tools to our field and support organizations aimed at significantly improving customer and partner experience.
$124M are for R&D, $200M are for sales and marketing, $58M are for G&A expenses.

VMware reports that the total workforce now includes nearly 500 new people, reaching a total headcount of 7400 people (already up to 7700 in this Q2), coming from the acquisition of Zimbra, the acquisition of RTO Software and the inclusion of the EMC Ionix division.

VMware closes the Q1 2010 with nearly $2.8B of cash and $1.4B of deferred revenue, an increase of $270M compared to last quarter, and quite a bit to continue its shopping spree (as confirmed in the forecast below).

The company expects Q2 2010 revenues between $635M and $665M, and a sequential decline in license revenue. It also expects Q3 license revenue to be flat to slightly down from Q2.
Overall, VMware expects a 2010 revenue between $2.625B and $2.725B, equal to a 30-35% growth for the year. The full year non-GAAP operating margin is expected in a range of 25% to 27%, but this could be disrupted by M&A activity.

About M&A, the company’s CEO, Paul Maritz, also clarified what kind of acquisitions VMware is looking for:

…we are seeking to invest for future capability so we are seeking to look at things that can strategically add to our technology repertoire rather than bulking up on revenue.

During the call Maritz also recapped the planned updates for this year: a new major version of vSphere (version 4.1 currently is in private beta), the integration of EMC Ionix products in the vCenter family and a major new version of View (version 4.5 is expected somewhere this summer according to rumors).

Maritz closed the Q&A session at the end of the call with a very interesting answer given to an analyst who asked if VMware is entering the database business after hiring the leader of the Redis project:

The very, very short answer to your question is that we are not trying to get into the database business per se. We are trying to be into the business of enabling applications for the cloud, both private and public. And as I said building off of our SpringSource acquisition we are adding to the repertoire of underlying middleware and technologies that we think are going to be needed to generate – to develop a new generation of applications. So, in that sense our hiring of the gentleman in question is a further indication as was the RabbitMQ acquisition of our intent to build a very compelling suite to enable you to build cloud based applications.

Thanks to Seeking Alpha for the call transcript.