VMware’s offerings see increased traction
Previously, we discussed VMware’s (VMW) billings growth and the performance of its NSX, EUC (end-user computing), and vSAN (virtual storage area network) offerings, which boosted its top line by 13.8% year-over-year in fiscal 2018.
VMware has continued to focus on the hybrid cloud and developing a stable multi-cloud management platform. Its IBM partnership, which benefits both companies in the hybrid cloud space, has continued to gain traction.
VMware Cloud on AWS (Amazon Web Services) (AMZN) launched extra VMware support and capabilities for VMware Site Recovery and VMware vMotion in 4Q18. PKS (Pivotal Container Service), a result of VMware’s partnership with Pivotal and Google (GOOG), also became available. Moreover, VMware’s strategic acquisitions of CloudCoreo and CloudVelox could boost its position in the hybrid and multi-cloud space.
In VMware’s 4Q18 earnings call, CEO Pat Gelsinger said that the CloudCoreo acquisition “will help us extend our support of consistent operations across any cloud, as their technology proactively identifies public cloud risk at the time of deployment, and prevents compliance violations before they occur.” In regards to the CloudVelox acquisition, he stated that “we expect the acquisition to become part of our Hybrid Cloud Extension service, and accelerate our road map to deliver cloud migration, mobility and delivery services in a hybrid, multi-cloud world.” In both fiscal 3Q18 and fiscal 4Q18, the hybrid cloud formed 8% of VMware’s overall revenue.
Record operating margin expansion
In fiscal 4Q18, VMware’s operating margin expanded to 37.3% from 36.8% in fiscal 4Q17. During the company’s 4Q18 earnings call, chief financial officer Zane Rowe said that “we’re coming off a quarter where we had 37.3% operating margin, the strongest operating margin I think we’ve had in the history of the company.”
While sales and marketing expenses rose to 32% of revenue from 28% in 4Q17, general and administrative expenses fell to 7% of revenue from ~8%. Research and development expenses rose to 21% of revenue from 17%. VMware’s non-GAAP (generally accepted accounting principles) operating margin expanded by 60 basis points due to its non-GAAP operating expenses as a percentage of revenue contracting by 30 basis points.