VMware ‘making progress’ on potential spin-off from Dell

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VMware ‘making progress’ on potential spin-off from Dell

VMware interim CEO Zane Rowe said the company is “making progress” on its potential spin-off from Dell Technologies.

“While our special committee of independent directors continues to evaluate the spin-off, we believe it could be value-enhancing to VMware and its stockholders,” said Rowe, chief financial officer and interim CEO, during a financial earnings call with media and analysts Thursday. “I’m pleased to tell you that we are making progress on the potential spin-off of VMware from Dell.”

Dell Technologies owns an 81 percent stake in VMware. Dell is looking to spin off its stake in VMware to Dell and VMware shareholders potentially later this year. Dell Technologies CEO Michael Dell told CRN last month that the departure of former VMware CEO Pat Gelsinger won’t disrupt the transaction.

“Nothing changes,” said Dell. “We believe a tax-free spin could drive shareholder, team member and customer value by simplifying capital structures and enabling flexibility.”

Interestingly, VMware did not provide any update or comments regarding its ongoing search to select a new CEO during its fourth fiscal quarter earnings on Thursday. Gelsinger became CEO of Intel earlier this month.

However, two of VMware’s top executives -- Raghu Raghuram, VMware’s chief operating officer of products and cloud services; and Sanjay Poonen, chief operating officer of customer operations – participated in the company’s earnings call on Thursday. Many believe Poonen and Raghuram are the two front runners for the VMware CEO position if the company decides to hire internally.

For its fourth fiscal quarter 2021, which ended 29 January, 2021, VMware generated US$3.3 billion in revenue, up 7 percent year over year.

A big win for VMware came from soaring subscription and Software-as-a-Service (SaaS) sales, which hit US$707 million, an increase of 27 percent year over year.

“With strong growth in our VMware Cloud Provider Program, end user computing, Carbon Black and VMware Cloud on AWS offerings, we continue to invest and expect to see further growth in this important area for us in FY22 and beyond,” said Zane. “Our focus is on scaling existing offerings as well as adding new solutions.”

One of VMware’s largest subscription and SaaS bet is with VMware Cloud on AWS. For its fourth quarter, VMware Cloud on AWS nearly doubled in terms of both workloads and revenue. “We continue to expand functionality and use case adoption,” Rowe said.

VMware generated net income of US$791 million or US$1.87 per share in the fourth quarter, compared to US$321 million or US$0.76 per diluted share during the same quarter last year.

Looking at the company’s entire fiscal year 2021, VMware captured US$11.8 billion in total revenue, representing a 9 percent increase compared to 2020. Subscription and SaaS sales reached US$2.6 billion in fiscal year 2021, up a whopping 38 percent annually.

VMware provided financial guidance for its current fiscal quarter 2022. VMware is projecting to generate US$2.91 billion in sales during its current first quarter 2022, and upwards of US$12.7 billion for the entire fiscal year.

VMware stock is down 2 percent in after-hours trading at US$140.02 per share.

This article originally appeared at crn.com

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