Weak VMware bookings hurt EMC in Q3

Bookings in some EMEA regions down year on year at virtualisation unit

EMC has cut its profit forecast after its virtualisation arm VMware saw income slump in Q3 thanks to weak performance in parts of EMEA and a delay in closing a key deal in the US.

For the three months to 30 September, GAAP net profit at EMC remained flat compared with last year at $587m (£366.74m), on sales which jumped nine per cent over the same period to $6bn. The sales spike was not enough to satisfy Wall Street, according to Reuters, which claims shares fell as much as four per cent in after-hours trading.

For the full year, EMC now expects revenues to reach only $24.5bn, compared with what Reuters claims is a previous estimate of $24.58bn. EMC said the updated forecast reflects the impact of currency fluctuations and a revised outlook from VMware.

VMware – 80 per cent of which is owned by EMC – saw net income slump annually by more than a quarter (26 per cent) to $194m in Q3. Sales at the firm shot up 18 per cent over the same period to $1.52bn.

The firm's chief operating officer Carl Eschenbach blamed the fact it still had not closed a giant US government deal, and lower-than-expected bookings across some regions in EMEA.

"While [overall] in EMEA bookings grew, in Russia geopolitical tensions weighed on the bookings performance and we saw a more than 50 per cent decline year over year," he said on a call transcribed by Seeking Alpha.

"In a weak German economy we saw lower bookings than expected. [But] with our German sales leadership team now solidly in place, we expect to see better bookings performance going forward.

"In the Americas, as you all recall, we were forecasting a strong federal performance driven by a particularly large ELA opportunity. This larger ELA did not complete in the quarter, which led to a year-over-year decline in our federal business."

Elsewhere in EMC, other firms in its "federation" performed well. Its Information Infrastructure business saw sales climb six per cent year on year, while revenue at security arm RSA grew four per cent over the same period. Sales in is latest business unit Pivotal – which is focused on big data technology – grew by almost a quarter in Q3, making it the fastest-growing of the federation firms.

EMC's chief executive Joe Tucci said his company is on the right track.

"EMC's continued momentum is evidence that our strategy and execution are working," he said.

"Our strategically aligned businesses are well positioned to capitalise on the massive IT market opportunity in front of us. From my conversations with customers, it's clear that we have the right best-of-breed technologies in cloud, mobile, big data and security."