VMware's third quarter results were better than expected as sales surged 14 percent from a year ago.
The company reported third quarter earnings of $261 million, or 60 cents a share, on revenue of $1.29 billion, up 14 percent from a year ago. Non-GAAP earnings were 84 cents a share.
Wall Street was looking for non-GAAP earnings of 82 cents a share on revenue of $1.288 billion in the third quarter.
VMware, which exited the quarter with cash and equivalents of $5.84 billion, said that 2013 is playing out as expected.
In a statement, VMware CFO Jonathan Chadwick said "we are seeing strong customer demand for new solutions such as the software-defined data center" and that the prospects for the rest of the year are strong.
In the third quarter, VMware's services revenue was $725 million with license revenue of $564 million. Software maintenance accounts for the bulk of VMware's services sales.
On a conference call with analysts, Chadwick said the company is projecting fourth quarter revenue of $1.45 billion to $1.48 billion. Wall Street was expecting $1.476 billion. VMware projected non-GAAP operating margins of 35 percent to 36 percent in the fourth quarter. Chadwick added:
We expect a fairly flat year-over-year performance in U.S. Federal. And, continue to monitor any potential effects of the U.S. government shutdown. Secondly, given the typical seasonal strength of Q4, we are expecting to build both license deferred and total deferred revenue, but at a lower sequential dollar value increase as compared with last year.
For 2014, VMware added that it can grow sales at about 15 percent a year.
VMware CEO Pat Gelsinger said the recent acquisition of Desktone is an example of where the company is going:
We're excited about our acquisition of Desktone, as they are the industry leader in desktop as a service. Together, VMware and Desktone are well-positioned to help our customers quickly modernize and move their desktop infrastructure to the cloud.
Carl Eschenbach, VMware's operating chief, said CXOs are also becoming more involved with the buying cycle.
Customers are also into getting management products in more parts of the business. As a wider range of decision makers are interested in the management functionality from VMware, including CIOs, CFOs, VPs of IT finance, VPs of operation, etcetera.
By region, 52.4 percent of VMware's third quarter revenue was international.