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Category: Stock Market and VMware
Date: 25 August 2019 Stock Price: $133.42 We take a look at the 2nd quarter financial results of VMware, the cloud infrastructure and business mobility group for their 2020 financial year.
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About VMware
Accelerate your digital transformation through a software-defined approach to business and IT. The trusted infrastructure provider of choice for more than 500,000 customers globally, VMware pioneered virtualization and now delivers a uniquely consistent platform for cloud and business mobility. As a proven leader, we allow you to run, manage, connect and secure applications across clouds and devices in a common operating environment, so you get both freedom and control.
Preferred Choice for Enterprises
100% of Fortune 500 companies choose VMware infrastructure, finding tens of billions of dollars in savings.
Lowest TCO, Highest Business
ValueCheck our TCO calculators and planning tools to see how VMware platforms deliver the best business value, no matter what type of infrastructure you need.
Vast Solution Ecosystem
More than 75,000 partners worldwide deliver thousands of solutions built on VMware open interfaces, giving customers across all industries the most flexibility and broadest software support.
Recognized by Analysts
Gartner, Forrester, and IDC consistently recognize VMware as a market leader.
Preferred Choice for Enterprises
100% of Fortune 500 companies choose VMware infrastructure, finding tens of billions of dollars in savings.
Lowest TCO, Highest Business
ValueCheck our TCO calculators and planning tools to see how VMware platforms deliver the best business value, no matter what type of infrastructure you need.
Vast Solution Ecosystem
More than 75,000 partners worldwide deliver thousands of solutions built on VMware open interfaces, giving customers across all industries the most flexibility and broadest software support.
Recognized by Analysts
Gartner, Forrester, and IDC consistently recognize VMware as a market leader.
Financial overview of VMware's latest results
Highlights from the release:
Numbers we are interested in: (for the quarter)
- VMware and Pivotal Software have entered into a definitive agreement under which VMware will acquire Pivotal for a blended price per share of $11.71, comprised of $15 per share in cash to Pivotal Class A stockholders, and VMware’s Class B shares exchanged for Pivotal Class B shares owned by Dell Technologies at an exchange ratio of 0.0550 shares of VMware Class B common Stock for each share of Pivotal Class B common stock. The transaction has an enterprise value of $2.7 billion. •
- VMware and Carbon Black have entered into a definitive agreement under which VMware will acquire Carbon Black through a cash tender offer for $26 per share, representing an enterprise value of $2.1 billion.
- Revenue for the second quarter was $2.44 billion, an increase of 12% from the second quarter of fiscal 2019.
- License revenue for the second quarter was $1.01 billion, an increase of 12% from the second quarter of fiscal 2019.
- GAAP net income for the second quarter was $4.93 billion, including a $538 million unrealized loss on strategic investment in Pivotal Software and $4.9 billion discrete tax benefit resulting from an internal transfer of international intellectual property rights, or $11.83 per diluted share, compared to $644 million, or $1.56 per diluted share, for the second quarter of fiscal 2019. Non-GAAP net income for the second quarter was $667 million, or $1.60 per diluted share, up 4% per diluted share compared to $638 million, or $1.54 per diluted share, for the second quarter of fiscal 2019.
- GAAP operating income for the second quarter was $523 million, an increase of 3% from the second quarter of fiscal 2019. Non-GAAP operating income for the second quarter was $802 million, an increase of 9% from the second quarter of fiscal 2019.
- Operating cash flow for the second quarter was $699 million. Free cash flow for the second quarter was $611 million.
- Total revenue plus sequential change in total unearned revenue grew 17% year-over-year
- License revenue plus sequential change in unearned license revenue grew 12% year-over-year.
Numbers we are interested in: (for the quarter)
- Total revenue: $2.4,439 billion (up from $2.174 billion for the same quarter of the previous year)
- Operating income: $523 million (up from $509 million for the same quarter of the previous year)
- Net income: $ 4.926 billion (up from $ 644 million for the same quarter of the previous year) - Massive change due to a large tax provision
- Net income per weighted-average share, diluted for Classes A and B: $ 11.83 (up from $ 1.56 due to the significant tax provision)
- Weighted-average shares, diluted for Classes A and B : 416.288 million (up from 413.286 million for the same quarter of the previous year)
- Total stockholders’ equity: $5.199 billion
- Net asset value per share: $12.49
- Accounts receivable: $1.515 billion (down slightly from $1.576 billion for the same quarter of the previous year)
- Net cash provided by operating activities: $699 million (down from $787 million for the same quarter of the previous year)
- Cash generated from operations per share: $1.68
- PE ratio (excluding tax provision): 21.3
VMware (NYSE:VMW) management commentary on the results and earnings guidance
“Building on another solid quarter, we are thrilled about announcing our intent to acquire Pivotal and Carbon Black,” said Pat Gelsinger, chief executive officer, VMware. “These acquisitions address two critical technology VMware, Inc. priorities of all businesses today — building modern, enterprise-grade applications and protecting enterprise workloads and clients. With these actions we meaningfully accelerate our subscription and SaaS offerings and expand our ability to enable our customers’ digital transformation.” “We are pleased with our strong financial performance in Q2, which reflected broad-based strength in all three geographies,” said Zane Rowe, executive vice president and CFO, VMware. “Our cloud strategy and strong Hybrid Cloud and SaaS growth will substantially accelerate, as we bring Pivotal and Carbon Black into the portfolio.
VMware (NYSE:VMW) stock price history
The image below o shows the stock price history of VMware (NYSE: VMW) for the last 5 years.Its a relatively up and down trip for shareholders of VMware. The stock rose from around $50 a share to over $200 in early 2019 and now its trading at around $130 a share.
VMware (NYSE:VMW) stock valuation
So what is our target price (or full value) for VWmare. Based on their latest financial results we value VMware shares at $136.10 a share.The share price ran hot earlier in 2019 and in late 2018 as did most technology stocks with the craze for tech and cloud stocks pushing up prices to unrealistic levels, from which it has come down since then. At its current price we believe they are close to full value and don't see great value of long term fundamental investors at its current price.