VMware Earnings Review: Performance Downtrend Evident

VMware reported QE June 2012 financial results on Monday, July 23

New CEO Pat Gelsinger has a financial performance downtrend to contend with. Earnings per share growth year over year has decreased 4 consecutive quarters and is now -14% for this latest QE June 2012. This is the first EPS YoY decrease since the QE 12-31-09. Total revenues growth year over year has decreased 4 consecutive quarters and is now +22%, which is still respectable, but is also the lowest since the QE 12-31-09 (+18%).

Result, QoQ Change, YoY Change
Total Assets: $9.50 billion, +4%, +26%
Total Revenues: $1.12 billion, +6%, +22%
Net Income: $191.75 million, 0%, -13%
Earnings per Share: $0.44, 0%, -14%

QE September 2012 guidance for total revenues is a sub par -1% to +3% QoQ and +18% to +22% YoY. The 10-quarter YoY average has been +34%. Full 2012 guidance for total revenues is +20% to +23% YoY, which was raised at the preliminary financial results call last week.

VMware also announced the acquisition of Nicira, Inc., a pioneer in software-defined networking (SDN) and a leader in network virtualization for open source initiatives.











“The quarter’s strong performance reflects the continued confidence customers have in our solutions,” said Paul Maritz, chief executive officer, VMware. “Our products, amplified by the recent acquisitions, including Nicira, are providing the means for our customers to transform IT as we move into the Cloud Era.”

“We are very pleased with our second quarter results,” said Carl Eschenbach, chief operating officer, VMware. “Despite the tough market conditions, we achieved record quarterly results in total revenue, license revenue, and non-GAAP operating income. Third quarter 2012 revenues are expected to be in the range of $1.11 and $1.15 billion. Annual 2012 revenues are expected to be in the range of $4.540 and $4.635 billion, an increase of 20.5% to 23.0% from 2011. Annual license revenues are expected to grow between 11% and 15%.”

VMware to Acquire Nicira

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Microsoft Earnings Review: EPS Suffers From $6.2 Billion Bungled Vision!

Microsoft reported QE June 2012 financial results on Thursday, July 19

Though known in advance, you really have to see the financial statements and the charts below to appreciate the extent of what Microsoft management is capable (incapable?) of. Microsoft took the $6.19 billion non-cash accounting charge, announced 7-2-12, related to the 2007 acquisition aQuantive, Inc. Yep, they wrote off as an impairment the goodwill on that failed venture. And what a failure it was! So we begin the current quarterly financial performance in a very deep hole for this monumental loss and bungled vision.

Ignoring any hard-won bottom line gains against Apple, Google, Amazon, et. al now wiped out by a single acquisition catastrophe, year over year total revenues have been flat to decreasing recently. Earnings per share year over year was downtrending anyway. As I have noted before, the ongoing existential questions are now if Microsoft is ultimately relevant as the technology leading edge races forward and if the company life cycle has peaked.

Total assets are now a record $121+ billion. Apple, HP, and IBM are the other exclusive members of the Big Tech $100 Billion Assets Club. Liquid assets (cash, cash equivalents, marketable securities) have increased to an amazing $63+ billion. Add noncurrent equity and other investments and total asset reserves reach nearly $73 billion!

Metric, QoQ Change, YoY Change
Total Assets: $121.27 billion, +3%, +12%
Total Revenues: $18.06 billion, +4%, +4%
Net Loss: ($492 million), -110%, -108%
Loss per Share: ($0.06), -110%, -109%













“We delivered record fourth quarter and annual revenue, and we’re fast approaching the most exciting launch season in Microsoft history,” said Steve Ballmer, chief executive officer of Microsoft. “Over the coming year, we’ll release the next versions of Windows, Office, Windows Server, Windows Phone, and many other products and services that will drive our business forward and provide unprecedented opportunity to our customers and partners.” “The combination of solid revenue growth and rigorous cost discipline drove double-digit operating income growth for the quarter, adjusting for the goodwill impairment and deferred revenue,” said Peter Klein, chief financial officer of Microsoft. “We are focusing our resources in strategic areas that will deliver shareholder value and long-term growth opportunities.”

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Qualcomm Earnings Review: Solid Quarter, Disappointing Guidance

Qualcomm reported QE June 2012 financial results on Wednesday, July 18

Qualcomm reported solid growth YoY for total revenues, net income, and earnings per share. The outlook for next quarter was disappointing and more of the same - flat to slow growth QoQ.

The concern is negatively trending margins: gross margin for equipment and services, operating margin, and net margin. These peaked at QE June 2009, QE March 2011, and QE December 2010, respectively. The net margin calculation excludes gain on sale from discontinued operations at QE March 2012. Some other adjustments were not made.

On a FY basis, excluding the QE March 2012 one-time $0.44 GAAP gain on sale of discontinued operations focuses on the core business. The FY 2012 GAAP EPS guidance ($2.97 to $3.03) is then an increase over FY 2011 GAAP EPS ($2.53) of +15% to +17%. This is solid, but lower than originally projected. The FY 2012 ends next QE September 2012.

Metric, QoQ Change, YoY Change
Total Assets: $42.45 billion, +2%, +21%
Total Revenues: $4.63 billion, -6%, +28%
Net Income: $1.21 billion, -46%, +17%
Earnings per Share: $0.69, -46%, +13%

Qualcomm QE September 2012 Business Outlook
• GAAP & Non-GAAP Revenues: $4.45B - $4.85B
• GAAP EPS: $0.62 - $0.68
• Non-GAAP EPS: $0.78 - $0.84













“Adoption of 3G and 3G/4G technologies continues around the world, driving strong year over year growth in our chipset and licensing businesses this quarter,” said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. “Looking forward, our growth estimates for 3G/4G device shipments in calendar 2012 have moderated slightly, and we now expect the demand profile of the calendar year to be more back-end loaded as new devices are launched for the holiday season. Although our outlook for semiconductor volumes in the fiscal fourth quarter has been reduced from our prior expectations, we are ramping supply of our 28 nanometer chipsets to help enable what we expect to be a strong December quarter for our semiconductor business.”

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IBM Earnings Review: Performance Rebounds, Raises Guidance

IBM reported QE June 2012 financial results on Wednesday, July 18

The good is both net income and earnings per share showed growth QoQ and YoY. Some uncertainty is created by total revenues decreasing -3% YoY, even though there was a +5% QoQ increase. Total revenues growth YoY has been downtrending since QE June 2011 (see chart below).

CFO Mark Loughridge stated growth will be skewed towards the second half of 2012. Hopefully more traction and growth will be shown next quarter and the acceleration will become evident. New CEO Ginni Rometty will have to wait until later in 2012 to attempt to top the stellar Q4 2011 financial results. We await.

IBM raised guidance on the full-year 2012 GAAP EPS to $14.40+ from $14.27+ (earlier was $14.16+). The full-year 2012 Non-GAAP outlook was increased to $15.10+ from $15.00+ (earlier was $14.85+).

IBM has a large, embedded product financing operation which results in a lower return on assets (+14%) than other technology companies. Financial position has been acceptable, with adequate capital, moderate debt, and sufficient liquidity. Total assets place IBM in the Big Tech $100 Billion Assets Club along with Apple, HP, and Microsoft.

Metric, QoQ Change, YoY Change
Total Assets: $113.83 billion, -1%, 0%
Total Revenues: $25.78 billion, +5%, -3%
Net Income: $3.89 billion, +27%, +6%
Earnings per Share: $3.38, +30%, +13%















"In the second quarter, we delivered strong profit, earnings per share and free cash flow growth. This performance reflects continued strength in our growth initiatives and investments in higher value opportunities," said Ginni Rometty, IBM president and chief executive officer. "These are fundamental elements of our long-term business model. "Looking ahead, we are well positioned to deliver greater value to a wider range of clients and to our shareholders. Given our performance in the first half and our outlook for the second half, we are raising our full-year operating earnings per share expectations to at least $15.10."

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VMware to Acquire Nicira

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VMware to Acquire Nicira

Acquisition Expands VMware's Networking Portfolio to Revolutionize Networking for the Cloud and Provide a Full Suite of Capabilities for Any Cloud Environment

PALO ALTO, CA -- (Marketwire) -- 07/23/12 --

VMware, Inc. (NYSE: VMW), the global leader in virtualization and cloud infrastructure, today announced it has signed a definitive agreement to acquire Nicira, Inc., a pioneer in software-defined networking (SDN) and a leader in network virtualization for open source initiatives.

"VMware has led the server virtualization revolution, and we have the opportunity to do the same in datacenter and cloud networking," said Paul Maritz, chief executive officer, VMware. "The acquisition of Nicira adds to our portfolio of networking assets and positions VMware to be the industry leader in software-defined networking."

VMware will acquire Nicira for approximately $1.05 billion in cash plus approximately $210 million of assumed unvested equity awards. The acquisition is subject to regulatory approvals and other customary closing conditions. The parties expect the acquisition to close during the second half of 2012. The acquisition has been approved by the boards of directors of both VMware and Nicira and the stockholders of Nicira.

The Software-Defined Datacenter - The Foundation of Cloud Computing

For customers whose requirements for managing and provisioning resources extend beyond VMware-only environments, DynamicOps builds on the capabilities of vCloud Director by enabling customers to consume multi-cloud resources (e.g., physical environments, Hyper-V- and Xen-based hypervisors, and Amazon EC2). DynamicOps' policy-based service governor capabilities automate and control how applications and users are provisioned across physical and heterogeneous cloud infrastructure resources.

Managing networks and network services to support cloud architectures is complex, time consuming and limits the achievement of full application mobility across clouds. Nicira is at the forefront of software-defined networking, which enables the dynamic creation of virtual network infrastructure and services that are completely decoupled and independent from the physical network hardware. Many industry leaders, including AT&T, DreamHost, eBay, Fidelity Investments, NTT and Rackspace are using the Nicira Network Virtualization Platform (NVP) to accelerate service delivery from weeks to minutes and dramatically reduce complexity and cost.

"Nicira helps customers dramatically improve business velocity and efficiency by transforming how networking works in the Cloud era," said Steve Mullaney, chief executive officer, Nicira. "I'm thrilled to be joining forces with VMware to help build the software-defined datacenter."

"The value we bring to customers lies in our open approach and the richness of capabilities in network virtualization," said Martin Casado, co-founder and chief technology officer, Nicira. "The combination of Nicira and VMware brings together two pioneering teams, and gives customers the industry leading SDN solution for any cloud environment, on any hypervisor in the enterprise and with Service Providers."

VMware plans to continue to support the open principles and technologies that have made Nicira solutions successful, including the Open vSwitch to connect physical networks and multiple hypervisors and the open extensibility framework to implement business-level policies from any cloud management system. This will allow enterprises and service providers to create the most flexible network topologies that seamlessly span any cloud environment. VMware is committed to maintaining Nicira's openness and bringing additional value and choices to heterogeneous environments and the OpenStack, CloudStack and other cloud related communities.

This acquisition expands VMware's networking portfolio, which includes the VMware vSphere® virtual switching, VMware vCloud® Director™ networking, vShield™ Network and Security software defined services, and the VXLAN protocol to provide a full suite of software-defined networking capabilities and a comprehensive solution lineup for virtualizing the network -- from virtual switching to virtualized layer 3-7 services. This will allow customers to create a pool of network capacity on top of any network infrastructure from which they can easily support tens of thousands of isolated virtual networks with the simplicity and operational ease of creating and managing virtual machines.

About VMware

VMware is the leader in virtualization and cloud infrastructure solutions that enable businesses to thrive in the Cloud Era. Customers rely on VMware to help them transform the way they build, deliver and consume Information Technology resources in a manner that is evolutionary and based on their specific needs. With 2011 revenues of $3.77 billion, VMware has more than 350,000 customers and 50,000 partners. The company is headquartered in Silicon Valley with offices throughout the world and can be found online at www.vmware.com.

VMware to Acquire Nicira (NYSE:VMW)

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Intel Earnings Review: Muddling Along on Lowered Revenue Outlook

Intel reported QE June 2012 financial results on Tuesday, July 17

Move along folks, nothing exciting going on here at Intel: declining margins, slowing financial performance, and uncertain revenue growth. The tough struggle continues in the transition to "refresh" its product line and adapt to reality.

Apparently there has been a delay and Intel has encountered additional obstacles, including macroeconomic uncertainty. CEO Paul Otellini continues to promise better days ahead but so far the horizon of realization continues receding ahead.

Metric, QoQ Change, YoY Change
Total Assets: $72.35 billion, +1%, +9%
Total Revenues: $13.50 billion, +5%, +4%
Net Income: $2.83 billion, +3%, -4%
Earnings per Share: $0.54, +2%, 0%
















Intel Outlook


Q3 2012 (GAAP, unless otherwise stated)
· Revenue: $14.3 billion, plus or minus $500 million.
· Gross margin percentage: 63 percent and 64 percent Non-GAAP (excluding amortization of acquisition related intangibles), both plus or minus a couple of percentage points.

Full Year 2012 (GAAP, unless otherwise stated)
· Revenue up between 3 percent and 5 percent year over year, down from the prior expectation for high single digit growth.
· Gross margin percentage: 64 percent and 65 percent Non-GAAP (excluding amortization of acquisition related intangibles), both plus or minus a couple of points.

“The second quarter was highlighted by solid execution with continued strength in the data center and multiple product introductions in Ultrabooks and smartphones,” said Paul Otellini, Intel president and CEO. “As we enter the third quarter, our growth will be slower than we anticipated due to a more challenging macro economic environment. With a rich mix of Ultra book and Intel —based tablet and phone introductions in the second half, combined with the long term investments we're making in our product and manufacturing areas, we are well positioned for this year and beyond.”


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VMware Announces CEO Change, Preliminary Q2 Financial Results

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VMware Announces Changes in Executive Leadership and Preliminary Second Quarter Financial Results

Pat Gelsinger Will Succeed Paul Maritz as Chief Executive Officer; Maritz to Remain on VMware Board of Directors, Joins EMC as Chief Strategist; VMware Announces Record Revenues

PALO ALTO, CA -- (Marketwire) -- 07/17/12 --

VMware today announced that Paul Maritz will be succeeded in the post as Chief Executive Officer of VMware, effective September 1, 2012, by Pat Gelsinger, currently president and chief operating officer, EMC Information Infrastructure Products. Maritz will remain a board member of VMware and will take on a new technology strategist role at EMC. Gelsinger will also be named to VMware's Board of Directors, effective September 1, 2012.

VMware also announced preliminary second quarter results, including record quarterly revenues of approximately $1.123 billion, up 22% over second quarter 2011, versus guidance of $1.100 billion to $1.120 billion, and second quarter non-GAAP operating margins of approximately 32% versus guidance of 30.25% to 31.25%. VMware expects full-year 2012 revenues to be between $4.540 billion and $4.635 billion with non-GAAP operating margins between 30.25% and 31.25%. VMware will discuss further details about its second quarter results and full-year business outlook during its earnings call at 2:00 p.m. Pacific Time on Monday, July 23, 2012.

"VMware has an extraordinary opportunity to help customers transform IT and deliver fundamentally more value to the businesses they serve," commented Paul Maritz, chief executive officer, VMware. "I'm very proud to have been part of an exceptional team of people who have accomplished a great deal over the past four years. VMware has not only transformed current IT practices but is leading in bringing Cloud Computing approaches and infrastructure to enterprises -- on-premise and off."

Maritz added, "Pat, with his deep passion for technology and track record, will complement the strong management team that is already in place at VMware, recently strengthened by the promotion of Carl Eschenbach to Chief Operating Officer. This all means that I can devote my time to developing the strategy of EMC as it relates to big data and a new generation of cloud-oriented applications."

Having spent 30 years at Intel before joining EMC, Pat has unique expertise in the x86 architecture and ecosystem underpinning the vast majority of virtualized environments today, which is broadly recognized as the foundation for Cloud Computing. At Intel, Pat was Senior Vice President and Co-General Manager of Intel's Digital Enterprise Group, the company's largest business group accounting for more than half of Intel's annual revenue. Under Gelsinger's leadership, that group was responsible for Intel's enterprise products including clients (PC's), Server, Embedded, Communications, Visualization and Storage products.

Gelsinger said, "The next generation of software defined-datacenters will be built by combining software with standardized hardware building blocks. VMware is uniquely positioned to be the leader in this endeavor and deliver a whole new level of value to customers and its existing important ecosystem partners. For more than ten years I have interacted with the team at VMware and have developed a deep appreciation for the people and technology of this remarkable company. I am really excited about the mission and becoming part of the team."

"In Pat and Paul, we are fortunate to have two world-class leaders," said Joe Tucci, chairman of VMware's Board of Directors. "The strong teams that we now have in place at VMware and EMC allow me to ask Pat and Paul to take on two of the defining challenges and opportunities of the new, unfolding IT era: Cloud Infrastructure and big data. They have unique backgrounds and skills, and I look forward to continuing to work with both of them."

Tucci continued, "I want to personally thank and congratulate Paul for all he's accomplished over the past four years helping transform VMware from a technology leader in virtualization to an industry leader in Cloud Computing, and I'm excited that he'll now be working full time on these new opportunities."

About VMware VMware (NYSE: VMW) is the leader in virtualization and cloud infrastructure solutions that enable businesses to thrive in the Cloud Era. Customers rely on VMware to help them transform the way they build, deliver and consume Information Technology resources in a manner that is evolutionary and based on their specific needs. With 2011 revenues of $3.77 billion, VMware has more than 350,000 customers and 50,000 partners. The company is headquartered in Silicon Valley with offices throughout the world and can be found online at www.vmware.com.

Source: VMware, Inc.

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VMware to Acquire DynamicOps, Inc.

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VMware to Acquire DynamicOps, Inc.

Customers Standardized on VMware Cloud Solutions Can Now Extend to Additional Virtual, Physical and Multi-Cloud Environments

PALO ALTO, CA -- (Marketwire) -- 07/02/12 --

VMware, Inc. (NYSE: VMW), the global leader in virtualization and cloud infrastructure, today announced that it has signed a definitive agreement to acquire DynamicOps, Inc., a provider of cloud automation solutions that enable provisioning and management of IT services across heterogeneous environments -- VMware-based private and public clouds, physical infrastructures, multiple hypervisors and Amazon Web Services. Terms of the acquisition were not announced. The acquisition is scheduled to close in Q3 2012 subject to customary closing conditions.

"As IT organizations evolve from builders to brokers of services many seek to provide access to diverse cloud resources in a controlled, managed fashion," said Ramin Sayar, vice president and general manager, Virtualization and Cloud Management, VMware. "DynamicOps' multi-cloud and multi-platform capabilities help to strengthen VMware's position as the infrastructure and management vendor of choice for cloud computing."

VMware believes that customers will benefit most by a standardized architecture, but will build solutions that make it easy for customers to choose the model that best works for their needs, including heterogeneous environments/management. Customers that have standardized their private and public clouds on VMware vSphere® can continue to rely on VMware vCloud Director™ to enable aggregation and management of virtual and cloud resources.

For customers whose requirements for managing and provisioning resources extend beyond VMware-only environments, DynamicOps builds on the capabilities of vCloud Director by enabling customers to consume multi-cloud resources (e.g., physical environments, Hyper-V- and Xen-based hypervisors, and Amazon EC2). DynamicOps' policy-based service governor capabilities automate and control how applications and users are provisioned across physical and heterogeneous cloud infrastructure resources.

"VMware and DynamicOps share a common vision for dramatically simplifying the management and provisioning of IT resources in the Cloud era," said Rich Krueger, CEO, DynamicOps. "I'm excited about DynamicOps joining VMware, and expect our customers to benefit from increased investment and support in the solutions they rely on to optimize their delivery of IT-as-a-service."

DynamicOps, Inc. originated as a spinoff of Credit Suisse's IT unit.

VMware to Acquire DynamicOps, Inc. (NYSE:VMW)

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Oracle Reports Strong Quarter at Annual Cyclical Peak

Oracle ($ORCL) reported QE May 2012 financial results on Monday, June 18

Oracle financial performance strengthened QoQ and YoY to the annual May cyclical high. Next quarter, the QE August, performance is projected to slow significantly QoQ and increase YoY.  CEO Larry Ellison said, "The development of Oracle Cloud is strategic to increasing the size and profitability of Oracle’s software business. Our Oracle Cloud SaaS business is nearly at a billion dollar revenue run rate, the same size as our engineered systems hardware business. The combination of engineered systems and the Oracle Cloud will drive Oracle’s growth in FY 2013." The Board of Directors authorized the repurchase of up to an additional $10 billion of common stock under its existing share repurchase program.

The long-term trend is clearly upwards as evidenced by the EPS chart below as each May peak is higher YoY and to a lesser extent for total revenues. The biggest performance concern is the flat to decreasing YoY growth rates in total revenues and slowing YoY growth rates in earnings per share. These are now at +11.3% and +1.3%, respectively. The biggest financial position negative has been the debt. This continues at 21% of total assets, down from a peak of 26% for the QE August 2010. Financial position continues acceptable with adequate capital, moderate debt, and reasonable liquidity.

Oracle Income Statement QE May 2012 Oracle reported total revenues of $10.92 billion, net income of $3.45 billion, and earnings per share of $0.69. From the prior quarter QE February 2012, these were +21%, +38%, and +41%. From the prior year QE May 2011, these were +1.3%, +7.5%, and +11.3%, respectively. Gross margin, operating margin, and net margin were up QoQ and YoY at 82%, 42%, and 32%, respectively. Cash flow from operations of $2.73 was very impressive and the 9th consecutive quarterly increase. The operating expense ratio of 40% was down, at the annual May cyclical low.

Oracle Balance Sheet QE May 2012 Total assets increased to a record $78.3 billion. The capital to assets ratio of 56% is historically strong. The current ratio of 51% is just above the historical average of 49%. The return on assets of +13.38% is is the 4th consecutive quarter above 13%. Total debt at 21% of total assets is just below the historical average of 22%.

Oracle Outlook QE August 2012 Oracle estimates QE August 2012 Non-GAAP EPS of $0.51 to $0.55 and analysts project the midpoint $0.53. This would be an significant -36% decrease QoQ, as expected, but a +10% increase YoY from $0.48. Oracle projects revenues YoY from -2% to +1%. Analysts project $8.66 billion, which would be a -21% QoQ and +3% YoY.











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Microsoft Announces $6.2 Billion Non-Cash Accounting Charge

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Microsoft CEO Steve Ballmer

Microsoft Announces Non-Cash Accounting Charge

REDMOND, Wash. — July 2, 2012 —

Microsoft Corp. today announced that it will take a non-cash, non-tax-deductible income statement charge for the fourth quarter of fiscal year 2012 for the impairment of goodwill in its Online Services Division segment, mostly related to its 2007 aQuantive, Inc., acquisition.

Under accounting guidelines, companies are required to conduct an annual goodwill impairment test for each business unit. Goodwill arises in an acquisition when the fair value paid for a business exceeds the value of the identifiable net assets. The goodwill in the Online Services Division was substantially the result of the 2007 acquisition of aQuantive. As a result of its 2012 impairment review, Microsoft has determined that a write down of its Online Services Division goodwill of approximately $6.2 billion is required.

Bing search share in the U.S. has been increasing, revenue per search (RPS) has been growing, MSN is the No. 1 portal in 29 markets worldwide and the company’s partnership with Yahoo! has continued to expand geographically. While the Online Services Division business has been improving, the company’s expectations for future growth and profitability are lower than previous estimates.

Microsoft completed its acquisition of aQuantive on Aug. 13, 2007, in an all-cash transaction valued at just over $6.3 billion. While the aQuantive acquisition continues to provide tools for Microsoft’s online advertising efforts, the acquisition did not accelerate growth to the degree anticipated, contributing to the write down.

Microsoft does not expect this accounting write down to affect its ongoing business or financial performance.

Microsoft's $6.2B Writedown After AQuantive Fails Microsoft is taking a $6.2 billion writedown for almost the entire amount it paid for Internet-advertising company AQuantive.

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Microsoft Surface Tablet: First Look and Hands On

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Microsoft CEO Steve Ballmer with Surface Tablet

Microsoft Surface Tablet: First Look ABC Tech Editor Joanna Stern has a first-look at the Microsoft Surface Tablet.

Microsoft Surface Tablet: Hands-On A look at Microsoft's new Surface Tablet running Windows 8.

Window Microsoft Surface In-Hand Hands-On A look at Microsoft's new Surface Tablet running Windows 8.

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