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VMware Touts Strong NSX GrowthVMware Touts Strong NSX Growth

NSX has more than 250 paying customers and is "gaining significant momentum and industry validation."

Mitch Wagner

October 22, 2014

3 Min Read
VMware Touts Strong NSX Growth

VMware says it's seeing strong growth in its virtual networks business, contributing to satisfying earnings expectations in the third quarter.

In its Q3 earnings call Tuesday afternoon, VMware Inc. (NYSE: VMW) CEO Pat Gelsinger said NSX is "gaining significant momentum and industry validation, with more than 250 paying customers today."

VMware is focused on building partnerships for NSX, making deals with other companies including Palo Alto Networks Inc. , F5 Networks Inc. (Nasdaq: FFIV), Arista Networks Inc. , HP Inc. (NYSE: HPQ), Dell Technologies (Nasdaq: DELL), and network security companies. NSX has proven popular in the US federal sector, said VMware president and COO Carl Eschenbach.

NSX is a popular SDN technology, used by carriers and enterprises to increase network and business agility. While not covered on the earnings call Tuesday, VMware has been working to increase sales to carriers. (See Cisco & VMware Are Apple & Google of SDN.)

Customers look to NSX for microsegmentation, network agility and network provisioning, executives said.

VMware describes microsegmentation as a means of augmenting perimeter firewalls. "You have a hard crunchy outside, but you have a soft chewy inside, so any threat that gets into the data center actually has very little lateral controls," says Rod Stuhlmuller, VMware director of product marketing, in a video. "It can move around, and it can attack machines within the data center." Microsegmentation builds a "honeycomb" of internal security barriers on the network to keep threats from spreading.

VMware executives said on Tuesday's call that it introduced NSX for channel sales last quarter. Earlier, about a year ago, it started to build a sales force of reps and system engineers to push NSX and network virtualization.

But despite strong NSX performance, third-quarter net income fell 26% due to higher expenses, including charges related to the recent $1.54 billion acquisition of mobile management vendor AirWatch LLC . (See VMware to Buy AirWatch for $1.54B.)

VMware reported a profit of $194 million (or 45 cents a share), down from $261 million (or 60 cents a share) a year earlier. Excluding stock-based compensation, acquisition-related charges and other items, earnings rose to 87 cents from 84 cents. Analysts polled by Thomson Reuters expected 83 cents.

Revenue increased 18% to 1.52 billion.

Need to know more about the management of network assets and applications in an SDN and NFV environment? Then check out the agenda for OSS in the Era of SDN & NFV: Evolution vs. Revolution, November 6, at the Thistle Marble Arch Hotel, London.

VMware forecast current-quarter revenue below Wall Street estimates, due to delay in closing a big US government deal and lower bookings in Germany, Russia and Japan. VMware forecast revenue of $1.67 billion to $1.71 billion for the quarter ending December 30, with analysts expecting $1.71 billion.

VMware was trading at $81.95, down 7.08%, at close of trading Wednesday.

VMware is majority-owned by EMC, which is being pressured by Elliott Management Corp. to change its structure, including spinning off VMware.

— Mitch Wagner, Circle me on Google+Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected].

About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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