About Vmware, Inc.

VMware makes a virtue of being virtual. The company develops software used to create and manage virtual machines -- computer functions spread across multiple systems. Companies use its applications to more efficiently integrate and manage server, storage, and networking functions in order to lower the cost of operating their IT systems. VMware also provides an extensive range of consulting, technical support, training, and certification services that accounts for more than half of sales. The company has marketing relationships with top computer hardware vendors, including Hewlett Packard Enterprise, IBM, and Cisco Systems. Dell Technologies holds a controlling stake in VMware through its acquisition of EMC.

Operations

VMware derives about 60% of its revenue from services, which include software maintenance, professional services, and software as service subscriptions, and about 40% from licensing of software.

Geographic Reach

VMware operates about 120 offices in the US and around the world. The geographic split of revenue is 50-50 between the US and international customers.

Sales and Marketing

VMWare sells its products through a direct sales force and distributors. Nearly 40% of sales are made to vdistributors Arrow Electronics Inc., Tech Data Corp., and Ingram Micro, which buy software from VMware and sell it to end-users or resellers.

Financial Performance

VMware posted a 9% increase in revenue in 2015 to reach $6.5 billion. Its license revenue rose 5% from sales of newer products such as NSX, AirWatch, and vSphere with Operations Management as well as its hybrid cloud offerings. Service sales jumped 14% in 2016 from maintenance contract renewals and contracts associated with new software license sales. Generally, customers buy two years of support and maintenance with each new license.

VMware recorded net income of just under $1 billion in 2015, a 13% increase from 2014. While the company spent more in 2015 for research and development, sales and marketing, and administrative functions, the level of spending remained at the same percentage of revenue as in 2014. The company reduced headcount by some 380 positions (about 2% of employment) in 2015 to streamline operations, resulting in a $23 million charge.

Cash from operations decreased to $1.9 billion in 2015 from $2.2 billion from changes in unearned revenues and accounts receivable. Although cash collections rose in 2015, they were negatively affected by the strengthening of the US dollar against foreign currencies.

Strategy

Although VMware is part of Dell Technologies that hasn't stopped the company from doing deals with Dell competitors. The company has agreements with IBM and Amazon Web Services (AWS) that help customers manage their private clouds and public clouds (running on IBM or AWS) using VMware software. The arrangements provide customers more flexibility with their cloud environments.

Sales of VMware's network virtualization product NSX have continued to grow since it was introduced in 2013. Sold as part of other VMware products, NSX allows networking hardware like routers and switches to be reconfigured and managed by via software. That reduces hardware costs for customers. NSX has been a hit for the company, on track to produce more than $1 billion in revenue in 2017.

Mergers and Acquisitions

In 2016, VMware acquired assets and employees from PLUMgrid, a software-defined networking startup, to strengthen its Software Defined Networking (SDN) and container strategy. PLUMgrid offers SDN and Network Function Virtualization (NFV) systems for more efficient operations.

Also in 2016, VMware acquired Arkin Net, a provider of SDN data center security and operations, for $67 million. This acquisition fits in with VMware's push on adoption of NSX.

Company Background

Founded in 1998, VMware was acquired by EMC for about $625 million in cash in 2004. Looking to unlock some of the value in its subsidiary, EMC sold some of its stake in VMware in a 2007 IPO. In 2016, Dell bought EMC, including VMware, for more than $60 billion.

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Vmware, Inc.

3401 Hillview Ave
Palo Alto, CA 94304-1383
Phone: 1 (650) 427-5000
Fax: 1 (650) 427-5001

Stats

  • Employer Type: Public
  • Stock Symbol: VMW
  • Stock Exchange: NYSE
  • CEO and Director: Patrick P. Gelsinger
  • CEO and Director: Patrick P. Gelsinger
  • COO, Customer Operations: Sanjay Poonen
  • 2018 Employees: 21,700

Major Office Locations

  • Palo Alto, CA

Other Locations

  • Colorado Springs, CO
  • Albany, NY
  • Austin, TX
  • Reston, VA
  • Bellevue, WA