Osprey Flyer: VMware Reports Record Q1 Earnings! (Financial Charts, Review) *Margins stable to improved* VMW

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VMware reported Q1 2011 financial results on Tuesday, April 19, 2011

*Charts and commentary have been updated for VMware Q1 March 2011 financial results*

VMware Reports Record Q1 Earnings!

VMware Summary Q1 2011 VMware reported record total revenues, operating income, net income, and earnings per share for Q1 2011. Financial position continues liquid with strong capital. The only negative on VMware is the historically low return on assets, although much improved in recent quarters, which continues below 7%.

VMware Income Statement Q1 2011 VMware reported record total revenues of $843.7M, record net income of $125.8M, and earnings per share of $0.29. From the prior quarter Q4 2010, total revenues were up +0.96%, net income up +4.95%, and earnings per share up +3.57%. From the prior year Q1 2010, these were up +33.18%, +60.43%, and +52.63%, respectively. Gross, operating, and net margins were stable to improved at 82.23%, 18.19%, and 14.91%, respectively. Cash flow from operations was a much improved and record $1.11 per share.

VMware Balance Sheet Q1 2011 Total assets increased +3.70% QoQ to a record $7.05B. The capital to assets ratio (total stockholders' equity divided by total assets) slightly increased to 56.64%. The current ratio (current assets divided by total assets) is a very liquid 64.80% and a multi-year high. VMware is very liquid with strong capital. Q1 total deferred revenue increased $118M and +6.36%.

VMware Performance by the Quarters (Charts)

VMware Earnings Per Share and Cash Flow per Share (Chart) Below is a chart of quarterly earnings per share and cash flow from operations per share. Current earnings per share of $0.29 is a multi-year high and matches the previous peak in December 2008 at $0.29. Earnings per share have now improved for 3 consecutive quarters. Current cash flow per share of $1.11 is at an all-time high.

VMware Total Revenues, Operating Income, and Net Income (Chart) Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues are at 6th consecutive quarterly record high of $844M. Current Operating Income is at a 2nd consecutive quarterly record high of $154M. Current Net Income is at a 2nd consecutive quarterly record high of $126M.

VMware Gross Margin, Operating Margin, and Net Margin (Chart) Below is a chart of quarterly gross margin, operating margin, and net margin. Gross Margin has been stable in the 80%-83% range in recent quarters and is currently 82.23%. Current Operating Margin of 18.19% is an 8-quarter high, after fluctuating in prior years. Current Net Margin of 14.91% is at a 9-quarter high and the highest since Q4 December 2008 (21.66%).

VMware Return on Assets (Chart) Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. The ROA peaked in March 2009 at 9.12%, dipped to less than half the peak, and has yet to fully recover. However, the ROA has improved for 5 consecutive quarters to the current 6.53%. This is the negative about VMware: a low ROA for a technology sector company. For a leading-edge technology company, a minimum 10% ROA should be expected and even 20% is a reasonable expectation.

VMware Growth Rates (Chart) Below is a chart of the quarterly (QoQ, Q/Q, quarterly change) growth rates for revenues and earnings per share. Total Revenues have increased for 7 consecutive quarters, ranging from the current +0.96% to +24.19% in Q4 December 2009. Earnings per Share have increased 3 consecutive quarters and the current +3.57% to +40.00% last quarter Q4 December 2010.

VMware Reports First Quarter 2011 Financial Results

PALO ALTO, CA, April 19, 2011 (MARKETWIRE via COMTEX) - VMware, Inc. (NYSE: VMW), the global leader in virtualization and cloud infrastructure, today announced financial results for the first quarter of 2011:

-- Revenues for the first quarter were $844 million, an increase of 33% from the first quarter of 2010.

-- Operating income for the first quarter was $154 million, an increase of 50% from the first quarter of 2010. Non-GAAP operating income for the first quarter was $252 million, an increase of 44% from the first quarter of 2010.

-- Net income for the first quarter was $126 million, or $0.29 per diluted share, compared to $78 million, or $0.19 per diluted share, for the first quarter of 2010. Non-GAAP net income for the quarter was $204 million, or $0.48 per diluted share, compared to $133 million, or $0.32 per diluted share, for the first quarter of 2010.

-- Operating cash flows for the first quarter were $478 million, an increase of 35% from the first quarter of 2010. Free cash flows for the quarter were $473 million, an increase of 45% from the first quarter of 2010.

-- Trailing twelve months operating cash flows were $1.3 billion, an increase of 20%. Trailing twelve months free cash flows were $1.3 billion, an increase of 39%.

-- Cash, cash equivalents and short-term investments were $3.7 billion and unearned revenue was $2.0 billion as of March 31, 2011.

U.S. revenues for the first quarter of 2011 grew 26% to $400 million from the first quarter of 2010. International revenues grew 40% to $444 million from the first quarter of 2010.

License revenues for the first quarter of 2011 were $419 million, an increase of 34% from the first quarter of 2010. Service revenues, which include software maintenance and professional services, were $425 million for the first quarter of 2011, an increase of 32% from the first quarter of 2010.

"The quarter's strong performance underscores the value that VMware is providing customers on their journey to cloud computing," said Paul Maritz, chief executive officer. "Customers continue to invest in our portfolio of virtualization and cloud infrastructure solutions to remove complexity and enable IT as a Service."

"VMware's first quarter results were driven by strong demand across all geographies," said Mark Peek, chief financial officer. "Second quarter 2011 revenues are expected to be in the range of $860 and $880 million, a year-over-year increase of 28% to 31%. For the year, we expect annual revenues to be in the range of $3.55 billion and $3.65 billion, an increase of 24% to 28% compared to 2010. We expect our non-GAAP operating margin for 2011 to expand slightly from 2010."

About VMware

VMware delivers virtualization and cloud infrastructure solutions that enable IT organizations to energize businesses of all sizes. With the industry leading virtualization platform -- VMware vSphere(R) -- customers rely on VMware to reduce capital and operating expenses, improve agility, ensure business continuity, strengthen security and go green. With 2010 revenues of $2.9 billion, more than 250,000 customers and 25,000 partners, VMware is the leader in virtualization, which consistently ranks as a top priority among CIOs. VMware is headquartered in Silicon Valley with offices throughout the world and can be found online at http://www.vmware.com/

VMware, VMware vSphere, VMware vCenter, VMware vCloud and Cloud Foundry are registered trademarks or trademarks of VMware, Inc. in the United States and/or other jurisdictions. Other marks mentioned herein are trademarks which are proprietary to VMware, Inc. or another company.

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