VMware warns SaaS surge will see sales slow
Virtualisation firm expecting less upfront revenue in the year ahead as hybrid cloud grows
VMware has warned that its annual growth for the coming year could be dragged down as its SaaS and hybrid cloud tech takes off.
The virtualisation giant said while the growth in the technology is good for the firm in the long run, the reduction in upfront revenues which are recognised will put a dent in sales.
On an earnings call discussing Q4 and full-year performance, which was transcribed by Seeking Alpha, VMware's chief financial offer Jonathan Chadwick said: "As I mentioned earlier, an increasing percentage of our revenue is being driven by hybrid cloud and SaaS revenues which are growing at a very high rate.
"While this is a positive development for VMware, it also has the impact of recognising less revenue upfront than otherwise will be recognised as part of a multi-year licence deal.
"We estimate that this will have a negative impact on total 2015 revenue growth of up to one percentage point and on licence revenue growth of at least two percentage points. Taken [with] the impact of a stronger dollar, the growth of hybrid cloud and SaaS are expected to reduce our 2015 total revenues by approximately three percentage points of growth and are expected to reduce our 2015 licence revenues by approximately five percentage points of growth from what we would otherwise report."
For the three months to 31 December, net profit at VMware fell two per cent to $326m (£214.31m) on revenue which rose 16 per cent to $1.7bn. For the full year, net profit was down 13 per cent on the year before to $886m – including the impact of its 2014 Airwatch buy – on sales which grew annually by 16 per cent to $6.04bn.
VMware's chief executive Pat Gelsinger was optimistic about the future.
"Customers continue to partner with VMware because we offer a new model for IT designed to rapidly and automatically deliver any app, anywhere, without sacrificing the need for security, availability and compliance," he said.
"In 2014, we surpassed the $6bn revenue mark for the first time, and in 2015 we're looking forward to providing our customers with extraordinary value through the strongest portfolio of products, services and solutions in our history."