Reaction to Intel and VMware 2016 Q1 results
Transcript
hi it's Keith Townsen from the CTO advisor.com and it's a little late to be doing a coffee chat so let's call this a tea leaves chat a bit because we're going to read the te leaves a little bit when it comes to both vmwares and Intel's 2016 q1 earning results which just hit earlier today interesting mix bag Intel bad news uh 20 well 12,000 layoffs which is never a good thing I think Intel is doing what they have to do as the industry changes the CPU
business and is directly tied to the PC business and the PC business has seen is low lowest level since 20 2007 I believe so they they're shifting over to Data Center Cloud software services and that shift is going to be a painful shift and they need to do they need to basically cut out that underperforming part or dying part of their business very uh sad but necessarily things that needs to be done so until until very straightforward VMware is a little different you know just over
the past couple of days I've done you know what a lot of people have perceived to be a fluffy piece on VMware and I don't think I'm changing my opinion much the numbers are the numbers they came out relatively strong as far as wall Street's expectations they are doing a $1.2 billion stock buyback which I think benefits Dale much more than it does vw's future shareholders but that's a whole another conversation set of discussions uh the thing that I think is really interesting for my audience
is the shift in licing VMware vpar is a very mature product therefore the sales of vpar should start to taper off as the increase in stuff like VMware V realize uh NSX uh vsan increases vmware's main mechanism for selling those other products has been Enterprise license agreements elas this is nothing new Microsoft does it so you know if you remember back in the 90s and 2000s you could go buy a kind of Microsoft seat license that include all of the office suite the window server licensing
exchange licensing they bundled a bunch of products together to make it appealing VMware is doing the same thing with it sweeter products VMware V re V realiz Suite so basically their Cloud orchestration software along with VMware vsan and NSX you bundle that stuff together with vmw vpar sell it to a customer and you increase license count for all of VMware products outside of just VMware vpar so the number of individual customers buying vmw vpar goes down or vmw vpar by itself goes down so Standalone VW
vpar licensing good number 35% compared to 50% almost 2 years ago very very good job but let's peel back the onion a little bit on that number vmware's alternative products VMware V realize and and ax in particular takes a lot of heavy lifting to install so basically you need a lot of trained Personnel to do it if you're a large Enterprise midsize Enterprise chances are you don't have the staff to do the actual implementation from a expertise perspective both of these products are really difficult to
implement and you need outside help VMware should be the best person to do this help so if you look at their Pro Professional Services numbers traditional logic would tell us that those numbers would increase from the Professional Services Unit just as well as the other licensing numbers that hasn't been the case and if you looked at the previous quarters each quarter had double digigit Revenue growth anywhere from as much as 30% % to as low as 16% this first quarter compared to Q4 of last year
only a 2.7% increase in Revenue growth that is not a very good indicator that customers are actually taking the others products from their Ela and actually implementing those products so what does that mean it probably means that a lot of customers have a lot of shelfware is that bad uh it's great for vw's Revenue uh customers are not getting time to value for these products which means that there's opportunity for both vars and VMware to get in there and convince customers to start implementing these product
Solutions you should see a growth I think in vmware's Professional Services as they focus on getting out the Evangelistic message of getting people to install these Solutions and I'm overall not I'm not I haven't become bearish on VMware but at the same time I think and I didn't I think conveyed this yesterday I'm not exactly bullish on VMware either VMware has a great opportunity they have a extremely robust client base that will need help as they transition to cloud and Cloud native applications and hybrid infrastructures
while VMware from a highest exe executive level gives a lot of airtime to the concept of their software defined data center strategy picking up when that truly picks up you'll see a uptick in their Professional Services in my opinion and you'll also see a larger commitment from VMware from a Evangelistic perspective and getting out the message and getting customers to actually use the products that they've bought that's it for this CTO advisor coffee chat we'll still call it a coffee chat visit me on on the
web I'm thect advisor.com and on the Twitter's at CTO advisor talk to you next time
