Osprey Flyer: VMware Reports Good Q3 Earnings (Financial Performance Charts & Review) *Meets our estimated EPS $0.20* VMW

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VMware reported earnings on Monday, October 18

VMware Reports Good Q3 Earnings

Financial charts of VMware data and related commentary have been updated on the VMware Financial Performance page for the September Q3 2010 financial results reported by VMware. The charts are:

VMware Performance by the Quarters

Earnings per Share and Cash Flow per Share

Total Revenues, Operating Income, and Net Income

Gross, Operating, & Net Margins

Return on Assets

Total Revenues & Earnings per Share Growth

Income Statement Q3 VMware reported total revenues of $714M, net income of $84.6M, and earnings per share of $0.20. From the prior quarter Q2 2010, total revenues were up +6.0%, net income up +13.5%, and earnings per share up +11.1%. From the prior year Q3 2009, these were up +45.8%, +121.4%, and +122.2%, respectively. QoQ increases were as we estimated, though below analysts' estimates, and YoY increases were excellent. For Q3, gross, operating, and net margins were 82.3%, 13.2%, and 11.8%, respectively. Gross margin remains stable, operating margin is down QoQ and up YoY, and net margin is up both QoQ and YoY. Cash flow from operations was a poor $0.46 per share, has now decreased for 2 consecutive quarters, and is down QoQ and YoY.

Balance Sheet Q3 Total assets increased +4.6% to a record $6.065B from the prior quarter of $5.797B. The capital to assets ratio (total stockholders' equity divided by total assets) is 58%, a multi-year high. The current ratio (current assets divided by total assets) is a very liquid 59%, though lower than the 60%+ traditional range. VMware is very liquid with strong capital. Q3 total deferred revenue increased $51M and +2.6%, which is lower than the Q2 increase of $153M and +8.6%. However, company guidance for Q4 total revenues is in the $790M - $810M range, a QoQ growth rate of +10.6% to +13.4%.

Our Estimate Q3 VMware met our estimates. "VMware will beat Q2 EPS of $0.18 and the Q3 EPS will be $0.20. We estimate Q3 Total Revenues of $721M but the margins will only generate an EPS of $0.20. We think VMware continues to have an excellent future, Q3 should be a turning point to the upside, and Q4 will be even better than Q3. Disclosure: We have no position, long or short, in VMW."

Our Estimate Q4 VMware offered guidance for Q4 December 2010 total revenues of $790M to $810M, a QoQ growth rate of +10.6% to +13.4%. For the present, our early estimate of the Q4 EPS is a minimum $0.22 compared to Q3 EPS of $0.20, a +10.0% increase.

Disclosure We have no position, long or short, in VMW.

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