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VMware Q4 Bests Expectations

January 27, 2017

VMware reported financial results for the fourth quarter and full year of 2016. VMware delivered Q4 net income of $441 million or $1.04 per share. Excluding certain items earnings were $1.43 per share. Investors were only looking for earnings of $1.40 per share. Revenue came in at of $2.03 billion in the period verses the $1.99 billion which was expected.

"Q4 closed out a strong fiscal 2016 and was one of the most balanced quarters for VMware in years," said Pat Gelsinger, chief executive officer, VMware. "We're very pleased with our strong product momentum and customer enthusiasm for our Cloud strategy. We believe we have the world's most complete and capable hybrid cloud architecture, uniquely offering customers freedom and control in their infrastructure decisions."

Zane Rowe, executive vice president and chief financial officer, VMware, said, "This was a very good year for VMware demonstrated by strong revenue, earnings and cash flow growth, as well as a significant amount of capital returned to shareholders in the form of stock repurchases. We're pleased to announce the authorization of an additional $1.2 billion of stock repurchases to be completed during fiscal 2018."

The company also announced that its Board of Directors has authorized the repurchase of up to $1.2 billion of its Class A common stock through the end of fiscal 2018, ending on February 2, 2018. Stock will be purchased from time to time, in the open market or through private transactions, subject to market conditions. The stock repurchase authorization is in addition to the Company's ongoing $500 million stock repurchase program announced in December 2016.

Quarterly Review
  • Revenue for the fourth quarter was $2.03 billion, an increase of 9% from the fourth quarter of 2015.
  • License revenue for the fourth quarter was $887 million, an increase of 8% from the fourth quarter of 2015.
  • GAAP net income for the fourth quarter was $441 million, or $1.04 per diluted share, up 18% per diluted share compared to $373 million, or $0.88 per diluted share, for the fourth quarter of 2015. Non-GAAP net income for the quarter was $597 million, or $1.43 per diluted share, up 13% per diluted share compared to $534 million, or $1.26 per diluted share, for the fourth quarter of 2015.
  • GAAP operating income for the fourth quarter was $543 million, an increase of 21% from the fourth quarter of 2015. Non-GAAP operating income for the fourth quarter was $747 million, an increase of 14% from the fourth quarter of 2015.
  • Operating cash flows for the fourth quarter were $463 million. Free cash flows for the quarter were $419 million.
  • Total revenue plus sequential change in total unearned revenue grew 13% year-over-year.
  • License revenue plus sequential change in unearned license revenue grew 14% year-over-year.

Annual Review

  • Revenue for 2016 was $7.09 billion, an increase of 8% from 2015 on a GAAP basis and up 7% on a non-GAAP basis.
  • License revenue for 2016 was $2.79 billion, an increase of 3% from 2015.
  • GAAP net income for 2016 was $1.19 billion, or $2.78 per diluted share, up 19% per diluted share compared to $997 million, or $2.34 per diluted share, for 2015. Non-GAAP net income for 2016 was $1.86 billion, or $4.39 per diluted share, up 8% per diluted share compared to $1.73 billion, or $4.06 per diluted share, for 2015.
  • GAAP operating income for 2016 was $1.44 billion, an increase of 20% from 2015. Non-GAAP operating income for 2016 was $2.29 billion, an increase of 9% from 2015.
  • Operating cash flows for 2016 were $2.38 billion. Free cash flows for 2016 were $2.23 billion.
  • Cash, cash equivalents and short-term investments were $7.99 billion, and unearned revenue was $5.62 billion as of December 31, 2016.

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