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Growth in Middle Kingdom plus beans spilled on software-defined networking cash

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VMware revenues have risen 17 per cent on the back of the company signing several lucrative multi-year licensing agreements.

The virtualization giant reported its second quarter of 2014 financials [PDF] on Tuesday, with revenues of $1.46bn and earnings-per-share of $0.81 both beating analyst expectations of $1.44bn and $0.79 respectively.

Net income for the quarter was $167m, down 32 percent on the $245m the company reported a year ago. That plunge is due to the company's $1.175bn acquisition of mobile device management company Airwatch announced in January, we're told.

VMware was able to close ten multi-year enterprise licensing agreements during Q2 2014, each of which had a value in excess of $10m. It also saw a growth in cloud revenues – the money it makes from its own vCloud Hybrid Service, and its reseller-led vCloud Service Provider Partner Program – of 80 percent, compared to the same quarter a year ago.

It enjoyed good growth in Europe and the Americas, chief operating officer Carl Eschenbach said on a conference call discussing the results, but had trouble in APAC due to stagnation in Japan.

"Growth in China remained very solid which is encouraging given the challenges some of our peers are seeing," Eschenbach said. Other major IT companies such as Microsoft and Cisco have had trouble growing sales in China, too.

Perplexingly, purchases of property and equipment for the quarter were only $76m, up $1m on the same quarter a year ago. VMware's cloud rivals – specifically Google, Amazon, and Microsoft – routinely spend hundreds of millions to billions on capital purchases every quarter, giving them access to vast economies of scale and potentially greater margins on their own cloud products. When asked about this lack of investment, VMware executives say that this is because a lot of its cloud strategy will manifest via VMware service-provider partner program pals.

The EMC-owned company also disclosed the revenues it has bagged for its software-defined networking NSX product, which is based on technology it acquired when it bought startup Nicira for $1.26bn in 2012.

So far, VMware has made about $100m from sales of the tech, executives said on a call discussing the results. Along with this, it revealed there are 300 VSAN systems in production, which has exceeded the company's own forecasts. Markets shrugged at the news, with VMware shares up 0.02 per cent in after-hours trading. ®

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