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EMC: What Drives the Data Storage Giant?

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Part 4
EMC: What Drives the Data Storage Giant? PART 4 OF 7

What Drives VMware’s Revenues?

Revenues rise 10% year-over-year

EMC (EMC) controls an 80% stake in VMware (VMW). The company’s NSX and Virtual SAN segments recorded triple-digit growth in fiscal 2015. VMware has stated that the company’s transition towards new offerings such as NSX, end-user computing, and Virtual SAN were the driving factors for its growth.

NSX, a part of VMware’s SDDC (software-defined data center) architecture, is a virtual networking and security software platform. VMware stated that NSX grew by more than 100% on a YoY basis, which led it to achieve an annual bookings run rate of $600 million. VMware’s revenues rose by 10% YoY (year-over-year) in 4Q15 to $1.9 billion and by 10% in fiscal 2015 to $6.6 billion.

What Drives VMware’s Revenues?

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Developments in storage and hyper-converged infrastructure 

VMware’s Virtual SAN is the company’s virtual storage offering in the HCI (hyper-converged infrastructure) space. According to TechTarget, “A hyper-converged infrastructure product includes storage, servers and networking all in neat little nodes — but some assembly may be required.”

Hyper-converged infrastructure startups such as Nutanix and SimpliVity could serve as a good fit for large server or storage vendors. Some of these vendors already have partnerships with global systems vendors Dell, Hewlett-Packard (HPQ), and Cisco Systems (CSCO). Dell made news in late 2015 when it announced the proposed acquisition of EMC (EMC) for $67 billion.

Investors who want broad-based exposure to VMware could consider investing in the iShares Russell 1000 Growth ETF (IWF). IWF invests ~13% of its holdings in application software and ~0.04% of its holdings in VMW.

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