Strong licensing sales drive VMware's Q2

Upturn in enterprise agreements and private cloud sales drives Q1 revenue spike for virtualisation goliath

VMware claims an upturn in demand for enterprise-level agreements (ELA) has fuelled the growth of its licensing revenues over the past year.

Total revenues rose 37 per cent year-on-year to $921m (£571m) in the second quarter of 2011, beating analysts' expectations in the process.

Licensing revenues, up 44 per cent on Q210, accounted for $465m of this sum.

During a conference call to discuss the results yesterday, a transcript of which can be found here, chief financial officer Mark Peek cited the demand for ELAs and its private cloud-enabling product, vSphere, as key revenue growth drivers.

"[It was] driven largely by strong global demand for vSphere, record ELA bookings as a percent of total bookings, including several deals that renewed early," he said.

"We were pleased to see a healthy mix in the quarter from renewals, as well as new ELAs, [and] continue to see stronger demand for our end user and management products, as customers renew their ELAs."

However, Peek warned the rise in early ELA renewals could have a detrimental impact on its Q3 results.

"Our licence revenue growth clearly benefited from a good number of ELAs that renewed early. We will not have this benefit in the third quarter and would expect ELA bookings to decline as a percentage of total bookings," he explained.

"With our recent announcements of vSphere 5 and cloud infrastructure suite, there's also the potential for short-term disruption in the sales process and close rates."

VMware also reported a 30 per cent year-on-year rise in services revenues, which topped $456m in Q2.

Of this sum, $386m was generated by software maintenance and support revenues, while its professional services business contributed the rest.

"Customers continued to buy, on average, more than 24 months of support and maintenance with each new licence purchased, illustrating their strong commitment to VMware as a core element of their datacentre architecture and hybrid cloud strategy," he said.

"Professional services revenue was $70m, up 17 per cent from last year, [and] this increase was driven primarily by our continued M&A activity and a higher attach rate for professional services with large deals."