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VMware Beats Expectations With Q1 Profits

The company also announced a stock buyback.

VMware may have allayed some fears with its latest financial quarter. The virtualization giant, in the midst of uncertainty over the purchase of parent company EMC by Dell and a recent round of layoffs, beat analysts' expectations with its Q1 earnings and announced a share buyback.

Revenue for the first quarter was $1.59 billion, an increase of 6 percent in year-over-year adjusted numbers, VMware announced yesterday. That meant a profit of $0.86 per share, when analysts expected $0.84 per share, according to MarketWatch.

"Q1 was a good start to 2016. We made solid progress with our strategic goal of building momentum for our newer growth businesses and in the cloud," VMware CEO Pat Gelsinger said in the press release. "We continue to see momentum across our portfolio of growth products and businesses, including NSX, Virtual SAN and End-User Computing."

During a conference call announcing the Q1 results, VMware also announced a stock buyback of 1.2 billion of its Class A common stock. "Our intent to repurchase $1.2 billion of stock this year underscores the confidence we have in the business and reinforces our capital allocation strategy, which includes returning capital to shareholders," said Zane Rowe, the new CFO who took over for Jonathan Chadwick after the last quarter. Chadwick was one of numerous high-level executive departures that have plagued VMware since the Dell acquisition was announced last October.

During the same earnings call last January, VMware also announced the layoffs of about 800 employees. All those factors added up to a rough start in 2016, but things may be looking up with the latest financial news. "By reacquiring its stock, VMware will reduce the number of shares outstanding for sale, likely increasing their market value," the Wall Street Journal reported.

The good earnings news and stock buyback resulted in a dramatic, 9 percent spike in VMware stock in after-hours trading.

About the Author

Keith Ward is the editor in chief of Virtualization & Cloud Review. Follow him on Twitter @VirtReviewKeith.

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