VMware profit beats expectations

More customer agreements lead to sales of $ 1.51B

VMware, the software maker whose parent company, EMC, has been targeted by an activist investor, said profit topped analysts’ estimates as more customers signed agreements to use its software.

Profit, excluding some costs, was 86 cents on sales of $ 1.51 billion, VMware said in a statement Tuesday. Analysts had projected 84 cents and revenue of $ 1.5 billion, according to data compiled by Bloomberg.

VMware, the market leader in selling virtualization software used by companies to save money by consolidating different applications on a single server, has boosted customer contract renewals and is adding more management tools to those deals. Elliott Management has been pressing EMC to spin off faster- growing VMware, saying the parent is undervalued and that there’s too much overlap between the companies.

“Our checks for VMware indicate continued momentum from the last quarter and strong attach rate of management tools to the platform,” Abhey Lamba, an analyst at Mizuho Securities USA who has a buy rating on the stock, wrote in a note before the results.

Shares of Palo Altobased VMware were unchanged in extended trading. The stock advanced 1.4 percent to $ 85.45 at the close in New York, leaving it up 3.6 percent this year.

VMware’s sales have also been affected by a stronger U. S. dollar and a shift to selling more software as Internet- based services and cloud programs. That lowers revenue because those deals have a smaller percentage of the sale recognized initially.

First- quarter net income fell to $ 196 million, or 45 cents a share, from $ 199 million, or 46 cents, a year earlier. Revenue rose 11 percent from $ 1.36 billion a year earlier.