Investopedia: VMware Singes The Shorts ... Again

Like it or not, "early" and "wrong" can mean the same thing in investing. It is hard to argue that VMware's (NYSE:VMW) valuation makes much sense or will be sustainable, but shorting this name has been a tricky proposition over the past couple of years. So even if the skeptics are right that VMware is apt to hit a wall in terms of growth and market penetration, this could still be a case where Wall Street's ability to remain irrational outlasts an individual investor's ability to stay short and remain solvent. 


Another Strong Quarter
Beating estimates is nothing new here, and VMware once again outpaced even the high end of its revenue estimate range. Reported revenue jumped 33% this quarter, with license revenue growing 34% (to roughly half the total). Billings were also quite strong (up 44%), and the company has roughly $2 billion in deferred revenue on the books. Of the company's bookings, 22% were enterprise license agreements (ELAs) and that percentage continues to improve.

There was also strong momentum on the profitability side of the business. Operating income (on a non-GAAP basis) jumped 44% and operating margin rose more than two full points. What's important here is that VMware is not delivering this growth by stinting on its future - R&D spending rose 23% this quarter (again on an adjusted basis), while general and administrative expenses have stayed under control. 



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