Shares soar at VMware after Q3 profit rocket

Virtualisation giant hails strong licensing growth which is forecast to continue into 2014

Shares at VMware rocketed last night after the firm announced better-than-expected results for its third quarter, which saw its profits rocket by two thirds.

For the three months to 30 September, VMware's net income shot up 66.24 per cent annually to $261m on sales which climbed 13.67 per cent to $1.29bn (£800m). Excluding revenue relating to its Pivitol initiative – a joint big data project with parent firm EMC – its sales for Q3 would have grown 19 per cent compared to last year.

The firm said its performance met or exceeded all its key goals for the quarter, and shares at the firm have jumped almost 14 per cent in after-hours trading.

Of the company's revenue, the majority of it came from services, sales of which jumped 12.75 per cent annually to $725m, while its licensing revenue shot up 14.88 per cent to $564m over the same period.

VMware's chief operating officer Carl Eschenbach said on a conference call transcribed by Seeking Alpha that the company had a particularly strong quarter on its Enterprise Licence Agreements (ELAs).

"Overall, we are outperforming on multiple fronts," he said. "We closed five deals above $10m and once again our field teams around the world did an outstanding job of closing ELAs. Approximately 33 per cent of total Q3 bookings were ELAs and Q3 was VMware's second-highest in quarter renewal rate for ELAs in terms of number of deals renewed."

At its VMworld Europe event in Barcelona last week, the firm hailed the success of ELAs in Europe, and said a UK pilot of its ELA Preferred Partner Programme – which meant all ELAs had to be sold by or with a channel partner – was so successful it would be rolled out across Europe.

Speaking about the company's performance in Q3, its chief executive Pat Gelsinger said it was all down to VMware's technology.

"VMware continues to build momentum globally, because we are uniquely positioned to help our customers transform to the mobile-cloud era of computing," he said.

"Customers are making long-term commitments to VMware to help them liberate resources from their current environments and power their businesses into the future."