VMware’s longtime technologist Raghu Raghuram will take over as CEO next week with great optimism around Dell Technologies spin-off of his company, marking the first time in over 15 years that VMware will be an independent company.
Raghuram said the Dell spin-off creates the “best of both worlds” in that VMware will still work closely with Dell around innovation and go-to-market, but the company will also be able to take its cloud provider partnerships to the next level.
“Post spin-off, we’ll be the only standalone cloud company that has the necessary strategic partnerships with all the major cloud companies and all the leading infrastructure companies to deliver on a truly customer-centered multi-cloud vision,” said Raghuram during the company’s first quarter financial earnings call on Thursday, which saw VMware sales increase 9 percent year over year to US$3 billion.
“I’m excited about the impending spin-off. It allows us to execute on our multi-cloud vision and strategy partnering with all the leading cloud companies and all the infrastructure companies,” said Raghuram, who’s been with VMware for the past 18 years and slated to become CEO on June 1. “The customers that I’ve spoken too, they’re positive [about the spin-off] based upon the increased flexibility that we’re going to have in our partnering strategy.”
Raghuram said through a five-year commercial agreement VMware will sign with Dell following the spin-off, the partnership will continue to be “very, very strong.”
“So we think, post spin, we’ll have the best of both worlds. The partnership with Dell today is clearly around a bunch of technology areas such as VxRail, VMware Cloud on Dell, SD-WAN, etc. Going forward, we have 15 statements of work on fundamental areas of differentiation, where together, we can delver a powerful solution for our customers and that’s going to be backed by our commercial agreement to work together in the field in service of our customers.”
Dell Technologies is set to spin off its 81 percent majority stake in VMware to Dell Technologies shareholders in the fourth quarter of calendar year 2021.
Zane Rowe, VMware’s chief financial officer and interim CEO, echoed Raghuram’s bullish optimism about becoming a standalone company.
“Having established VMware as a standalone company enhances our ability to extend our ecosystem and support, and our vision of creating this ubiquitous software and SaaS platform across all clouds and infrastructure,” said Rowe. “We’ll continue to have a strong relationship with Dell, but this allow us to use [our cloud] ecosystem more broadly.”
On Thursday, the Palo Alto, Calif.-based virtualization and software superstar reported its financial earning results for its first fiscal quarter 2022, which ran from Feb. 1 to April 30.
VMware generated a total of US$3 billion in sales, an increase of 9 percent year over year, with non-GAAP earnings of US$1.76 per share.
The biggest area of improvement was around subscription and software-as-a-service (SaaS) sales, which VMware has been focusing heavily on growing over the past few years. VMware’s SaaS and subscription revenue skyrocketed 29 percent year over year to US$741 million.
SaaS and subscription sales now represent 25 percent of VMware’s overall revenue, a major milestone for the company that traditionally focused on selling enterprise license agreements (ELAs). Raghuram said the majority of VMware products will be available in the form of SaaS and subscription by the end of 2021.
“We have to keep accelerating our subscription and SaaS model,” the new CEO said.
VMware’s net income for its first quarter was US$425 million, up from US$386 million year over year.
Raghuram said he’s confident that VMware will become the worldwide software leader in multi- and hybrid cloud computing.
“I’m confident we’ll seize the tremendous opportunity in multi-cloud platforms that will power an exciting new phase of growth. I’ve been privileged to have been with VMware for 18 years. Let me share with you that I’m as excited about our future today as I was the day I walked in the door,” he said.
VMware provided revenue guidance for its current second fiscal quarter of approximately US$3.1 billion, which would represent a sales increase of 8 percent year over year. Second quarter subscription, SaaS and license revenue is projected to reach US$1.48 billion, representing a 10 percent year over year increase.