VMware sees NFV as an opportunity to gain traction in the service provider infrastructure market as service providers travel down the same virtualization path that enterprises and VMware have already traveled together.
VMware Inc. (NYSE: VMW) can leverage its existing technology into the telco and service provider infrastructure market "that we've never participated in before," CEO Pat Gelsinger said on the company's quarterly earnings call Tuesday afternoon.
Vodafone, Ooredoo Kuwait, and IIJ Japan, are deploying NFV from VMware, with more SPs in the pipeline, Gelsinger said. (See VMware CEO Pat Gelsinger at Mobile World Congress, Ooredoo Kuwait Taps VMware for NFV, and VMware Lands NFV Deal at Internet Initiative Japan.)
"[Service providers] want to virtualize their infrastructure and get rid of silos of gear just like the data center has done over the last decade, so it's very analogous. This is a large potential," Gelsinger said.
But it will take time for VMware to infiltrate the telco market, he said. Telcos move slowly, and design wins and deployment cycles are slow and long. "But when you get into that market, the continuing ability to service and deliver is also long as well," Gelsinger said.
VMware has built an NFV business unit headed by senior leadership. "We're quite excited about this long-term potential," Gelsinger said.
'Solid' earnings VMware announced non-GAAP total revenues of $1.6 billion for the second quarter, up 10% year-on-year. GAAP net income was $172 million, or $0.40 per diluted share, up 5% per diluted share from $167 million or $0.38 per diluted share in the year-ago quarter.
VMware traded at $83.19, down 0.99%, in after-hours trading.
"Our second quarter results are solid, building on our solid start to the year in Q1," Gelsinger said in a statement.
For 2015 overall, VMware expects to see $6.575 billion to $6.685 billion total revenue, up 9-11% year-on-year.
VMware reported strong growth for its NSX SDN technology and cloud services.
NSX was involved in five of VMware's top 19 deals in the recent quarter, Carl Eschenbach, VMware president and COO, said. The company saw seven deals totaling $10 million or more.
VMware now has more than 700 paying NSX customers, up from 150 a year ago; and more than 2,000 VSAN customers, up from over 1,000 two quarters ago, Eschenbach said.
Customers look to NSX to provide network automation and microsegmentation -- the ability to subdivide networks into many virtual subnetworks separate from each other, for security and resilience purposes. Microsegmentation serves as the initial justification for the purchase.
As part of its SDN strategy, VMware is wooing carriers. VMware introduced software in March to let carriers run OpenStack and the company's own vCloud cloud manager side by side. VMware vCloud for NFV is designed to help carriers get started migrating to OpenStack while running vCloud for production cloud services. VMware sees OpenStack as the de facto standard in a year or two, but says it's not ready for prime time today. (See VMware Bows OpenStack/vCloud NFV.)
OpenStack is "immature and very difficult to stand up," Gelsinger said. Implementing OpenStack is "labor-intensive," requiring a large investment in high-end engineers. VMware's strategy is to add OpenStack components, such as Neutron networking, Nova management, and Storage APIs, on top of VMware NSX and vSphere. "The result is that they get rock hard, and they get all these new APIs on top of it," he said. These hybrid deployments can get set up in days rather than years for the alternative.
Many customers try to implement OpenStack themselves and later come to VMware, either to build an entire VMware stack or integrated VMware-Openstack, "because they underestimated the complexity of building it themselves," Eschenbach said. "It oftentimes boomerangs back to us."