Carbon Black represented a small slice of VMware's revenues in Q3, but the cloud computing and virtualization software and services specialist believes its acquisition of the security company will play a more prominent financial role in the quarters to come.
VMware closed its $2.1 billion purchase of Carbon Black on October 8, so the newly acquired company, which brings cloud-native endpoint security to VMware's portfolio, contributed just over $10 million in total revenue in Q3. But Carbon Black will represent a bigger slice of the revenue pie going forward.
"Carbon Black, together with the security driven value-add from our networking with micro-segmentation, end-user computing, cloud, and compute offerings in aggregate represents approximately $1 billion of business for us this year," Pat Gelsinger, VMware's CEO, said on Tuesday's earnings call.
With Carbon Black now in the fold, "VMware is now poised to take a significant leadership role in security for the new age of multi-cloud modern apps and modern devices," he added. "We view security as an essential and common thread throughout our offerings."
Soon after close, VMware has moved ahead with new Carbon Black-based solutions as well as a new partnership with Dell that makes Carbon Black Cloud the preferred endpoint security solution for Dell commercial customers, the exec added.
VMware is also nearing the close of its acquisition of Pivotal Software, which will be used to boost developer support for containerized Kubernetes applications. Gelsinger said VMware is "on track" to wrap that deal by the end of the fiscal year.
Gelsinger was also asked to weigh in on the US Department of Defense's recent awarding of a $10 billion Joint Enterprise Defense Infrastructure (JEDI) contract to Microsoft over expected frontrunner Amazon -- Amazon has since challenged the selection in a lawsuit alleging that bias against CEO Jeff Bezos derailed a fair bidding process.
"We're looking forward to getting to the eventual outcome of the appeals process," Gelsinger said, noting that the JEDI contract is a piece of a broader set of cloud opportunities in the US government. "Overall, we're well-positioned with our current partnerships, and we do expect that through those partnerships that we'll have a thriving government business, both on-premise as we have had as well as in hybrid and cloud offerings."
VMware Q3 revenues climbed 12% to 2.46 billion, including a 10% boost in license revenues, which reached $974 million in the period. VMware's hybrid cloud subscription and software-as-a-service recurring revenue rose 40% year-over-year and represented more than 13% of total revenue in Q3.
Q3 GAAP net income was $621 million, which included an unrealized gain of $249 million on an investment in Pivotal. VMware shares were down $4.29 (2.6%) to $160.61 each in afternoon trading Wednesday.
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— Jeff Baumgartner, Senior Editor, Light Reading