vmware (vmw) earnings report: q1 2016 conference call ... · vmware (vmw) earnings report: q1 2016...

CompanyName:VMwareIncCompanyTicker:VMWSector:T echnologyIndustry:ComputerSof tware&Services

EventDescription:Q12016EarningsCallMarketCapasofEventDate:21.91BPriceasofEventDate:58.292

©2014TheStreet,Inc.Al l R ightsReserved Page1of18

VMware(VMW)EarningsReport:Q12016ConferenceCallTranscriptThefollowingVMwareconferencecalltookplaceonApril19,2016,05:00PMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

PaulZ iots;VMwareInc;VP,IRPatGelsinger;VMwareInc;CEOandDirectorZaneRowe;VMwareInc;EVPandCFO

OtherPart icipants

UnidentifiedParticipent;UBS;AnalystJohnDiFucci;JefferiesLLC;AnalystPhillipWinslow;CreditSuisse;AnalystHeatherBellini;GoldmanSachs;AnalystMarkMoerdler;Bernstein;AnalystKeithWeiss;MorganStanley;AnalystGreggMoskowitz;CowenandCompany;AnalystMarkMurphy;JPMorgan;AnalystMichaelTurits;RaymondJames&Associates,Inc;AnalystNikolaiBeliav;BofAMerrillLynch;AnalystIttaiKidron;Oppenheimer&Co;AnalystNehalChokshi;MaximGroup;AnalystAbheyLamba;MizuhoSecuritiesCo,Ltd;AnalystRajeshGhai;MacquarieResearchEquities;AnalystJaysonNoland;RobertW.Baird&Company,Inc;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

WelcometotheVMwareQ12016earningscall.

Today'sconferenceisbeingrecorded.

Atthistime,IwouldliketoturntheconferenceovertoMr.PaulZ iots,VicePresident,InvestorRelations.Pleasegoahead,sir.

PaulZiots (VP,IR):

Thankyou.Goodafternoon,everyone.WelcometoVMware'sfirst-quarter2016earningsconferencecall.

OnthecallwehavePatGelsinger,ChiefExecutiveOfficer,andZaneRowe,ExecutiveVicePresidentandChiefFinancialOfficer.Followingtheirpreparedremarks,wewilltakequestions.

Ourpressreleasewasissuedaftercloseofmarket,andispostedonourwebsitewherethiscallisbeingsimultaneouslywebcast.Slideswhichaccompanythiswebcastcanbeviewedinconjunctionwithliveremarks,andcanalsobedownloadedattheconclusionofthewebcastfromir.vmware.com.




Onthiscalltoday,wewillmakeforward-lookingstatementsthataresubjecttorisksanduncertainties.Actualresultsmaydiffermateriallyasaresultofvariousriskfactors,includingthosedescribedinthe10-Ks,10-Qsand8-KsVMwarefileswiththeSEC.Weassumenoobligationto,anddonotcurrentlyintendto,updateanysuchforward-lookingstatements.

Inaddition,duringtoday'scallwewilldiscusscertainnon-GAAPfinancialmeasures.Thesenon-GAAPfinancialmeasures,whichareusedasmeasuresofVMware'sperformance,shouldbeconsideredinadditionto,notasasubstitutefororinisolationfrom,GAAPmeasures.

Ournon-GAAPmeasuresexcludetheeffectonourGAAPresultsofstock-basedcompensation,amortizationofacquiredintangibleassets,employerpayrolltaxonemployeestocktransactions,certainlitigationandotherrelateditems,andacquisition-relateditems,andapplynon-GAAPtaxrateandconstant-currencyadjustments.Youcanfindadditionaldisclosuresregardingthesenon-GAAPmeasures,includingreconciliationswithcomparableGAAPmeasures,inthepressreleaseandonourInvestorRelationswebsite.

Thewebcastreplayofthiscallwillbeavailableforthenext60daysonourCompanywebsiteundertheInvestorRelationslink.Oursecond-quarter2016quietperiodbeginsatthecloseofbusinessJune15,2016.Unlessotherwisestated,allfinancialcomparisonsinthiscallwillbeinreferencetoourresultsforthecomparableperiodof2015.

Withthat,I'llturnitovertoPat.

PatGelsinger (CEOandDirector):

Thankyou,Paul,andgoodafternoon,everyone.

Thisafternoon,IwillsummarizeourbusinessperformanceinQ1,inadditiontokeyannouncementswemadeduringthequarter,includingimportantupdatestoourexpandedcloudstrategy.AfterIdiscussthequarter,ZaneRowe,ourCFO,willprovideyouwithadditionaldetailregardingourbusinessandfinancialperformanceintheperiod.

Q1wasagoodstartto2016,bothforresultsandagainstourstrategicgoalofbuildingmomentumforournewergrowthbusinessesandinthecloud.Ourresultswereinlinewithourexpectationsfortheperiod,andsupportouroutlookforthefullyearthatwearticulatedonourcallwithyouinJanuary.

Wegrewtotalrevenue6%yearoveryearinconstantcurrencyto$1.6billion,withnon-GAAPearningsof$0.86pershare.VMware'svaluepropositionaroundthehybridcloud,software-defineddatacenter,andend-usercomputingcontinuetoresonatewithourcustomersaroundtheworld.Intermsofregionalbookingsperformance,Asia-Pacificperformedbest,followedbyEMEAandtheAmericas,althoughparticularemergingmarketssuchasRussia,BrazilandChinacontinuetoexperienceweakness.

Thisquarterwemadeimportantheadwaywithrespecttoourexpandedcloudstrategy,whichwediscussedtogetherduringourlastearningscallinJanuary.Ourcloudstrategyincludesthreecomponents.First,extendingourleadershipintheprivatecloud,thefoundationofourBusiness.

Second,helpingcustomersextendtheirprivatecloudintothepubliccloud;ourvCloudAirservice,andourvCloudAirnetworkpartnersarebothexamplesofthis.Andthird,connecting,managingandsecuringendpointsacrossarangeofpublicclouds,includingAmazonWebServicesandMicrosoftAzure.

InFebruary,aspartofourstrategytohelpcustomersextendtheirprivatecloudintothepubliccloud,weannouncedanexpansionofourpartnershipwithIBM,oneofourleadingvCloudAirnetworkpartners.CustomerswillbeabletotakeadvantageofVMware'ssoftware-defineddatacenterarchitecture,usingIBM'sgrowingfootprintof45clouddatacentersworldwide,enablingthemtoscaleglobally,andmanage




theirdatalocallyandsecurely.Multi-cloudenvironmentsarebecomingthenorm,andwebelievethatVMware'ssoftware-definedapproachoffersunparalleledcapabilitiestohelpcustomersmanagethesehighlycomplex,multi-cloudandmulti-deviceenvironments.

Q12016provedtobeastrongquarterfornewproducts,usecases,andupdatesacrossoursoftware-defineddatacenterandbusinessmobilityportfolios.Iamparticularlydelightedtoletyouknowthatduringthisquarterwecrossedathresholdof1,000issuedUSpatents,andthatwehavebeenrecognizedasnumbertwointhesoftwarecategoryofIEEEpatentqualityrankingsacrossthisportfolio.

Ontheendusercomputingfront,weunveiledanewplatformfordeliveringsecuredigitalworkspacesforflexibleworkstylesandbringyourowndevices.Usingtheprinciplesofconsumersimpleandenterprisesecure,VMwareWorkspaceONEdeliversadigitalworkspacethatintegratesmobilemanagement,desktopvirtualization,applicationdelivery,andidentitymanagementtechnologies,therebyaddressingbothend-userandITbusinessmobilityneeds.

WealsoannouncednewadvancementsinVMwareHorizon7,andanewhybridmodecapabilitythatwillbeavailableinVMwareHorizonAirtosimplifyapplicationanddesktopdelivery.Withtheseadvancements,VMwareHorizonwilloffertheindustry'smostcomprehensiveapplicationanddesktopvirtualizationportfolio,withoptionsforon-premises,off-premisesorhybriddeployments.VMwareAirWatchcontinuestoenjoystrongcustomeradoption,andisratedanenterprisemobilitymanagementleaderbytheleadinganalystfirms.

WealsomadesomeannouncementsontheSDDCsideoftheBusiness.Duringmykeynoteatthisyear'sRSAConference,wedemonstratedatechnicalpreviewofdistributednetworkencryptionpoweredbyNSX.Thisisauniquenewtechnologywhichenablestheencryptionofdataandapplicationsacrossclouds.Overall,NSXhasenjoyedanotherstrongquarter,withbookingsgrowingover100%yearonyear.

We'vereleasedVMwarevRealizeSuite7,whichprovidescustomerstheabilitytoprovisionandmanageatscale,compute,storage,networkandapplicationservicesacrosshybridcloudenvironments.AndwealsoannouncedthereleaseofVMwareVirtualSAN6.2,thefourthgenerationofVMwaresimpleenterprise-gradenativestorageforvSphere.VirtualSANservesasakeycomponentofourHyper-Convergedsoftwareoffering.

VMwareisaleaderinHyper-ConvergedInfrastructuresoftware,havingsoldtomorethan3,500customersin21monthssincetheinitialreleaseofVirtualSAN.Weareoptimisticaboutthelong-termgrowthpotentialforthisimportantnewHCIcategory.VMware'sHyper-ConvergedsoftwareincludesVMwarevSphere,VirtualSAN,andvCenterServer,transformingx86serversanddirect-attachedstorageintosimpleandrobustHCIsystems.Customersbenefitfromreducedcostsandmanagementcomplexitywithbreakthroughperformance.

Thisquarter,EMCandDellbothannouncednewdistributionoptionsforourHyper-Convergedsoftwareoffering.InFebruary,EMClaunchedthenewHyper-ConvergedVCEVxRailappliancefamily,whichfeaturesVMwareHyper-Convergedsoftware.EarlyinApril,DellannouncedthatitwillberesellingtheVxRailappliancefamily,inadditiontoVirtualSAN-readynodesbasedonDellPowerEdgeservers.

Letmeturntosomeleadershipupdateswemadeinthequarter.First,wearedelightedtowelcomeRajivRamaswamitoourexecutiveteam.RajivjoinedearlierthismonthasGMandEVPofourNetworkingandSecurityBusiness,andbringswithhimadeepunderstandingofthenetworkingindustryaftermostrecentlyservingasExecutiveVicePresidentandGeneralManageroftheinfrastructureandnetworkinggroupofBroadcomCorporation.

WithCarlEschenbach'smoveintoastrategicadvisorrolefortheCompany,wealsotooktheopportunitytoannounceexpandedrolesforothermembersoftheVMwareexecutiveteam.




MaurizioCarliandRayO'FarrellhavebothbeenpromotedtoExecutiveVicePresident.MaurizionowrunsourWorldwideSalesOrganization,andRayhasexpandedhisroleasChiefTechnologyandDevelopmentOfficertoincluderesponsibilityforVMware'sglobalservicesandcustomeradvocacy.Inaddition,SanjayPoonen,ExecutiveVicePresidentandGeneralManagerEnd-UserComputing,hasexpandedhisroletoincludeleadershipofVMware'smarketingandcommunicationsfunctions.

Iamalsopleasedtomentionthatforthesecondyearinarow,VMwarehasrankedonFortuneMagazine'slistof100bestcompaniestoworkforintheUS,competingamonghundredsofcompaniesforthehonor.Overall,weareconfidentinourstrategyandoptimisticaboutthemomentumwe'reseeingbehindourgrowthbusinesses.

Wearealsooptimisticaboutthelong-termvaluetoVMwareoftheproposedmergerbetweenDellandEMC,andtheopportunitiesforadeeperpartnershipwithDell.DuringQ1,wesawstrongmomentumfromourexistingrelationshipwithDellthroughinitiativessuchasDell'snewVMware-basedchannelofferingsandDell'suseofassessmenttoolstoprovidetheircustomerswithanIThealthcheckandhelpthemmovetobroadersoftware-defineddatacentersolutions.

Weseesignificantopportunitiesforongoingrevenuesynergies,bothfromourexistingrelationshipandsubsequenttothemergerbeingfinalized.

Inclosing,ourBoardhasrecentlyapprovedaplantobuyback$1.2billionworthofstockinaggregateduring2016.Thisprovidesagoodopportunityforustoreturncashtoshareholders,giventheconfidenceweseeintheBusiness.

I'llnowturnitovertoZanetotalkmoreaboutourbusinessperformanceinQ1.

ZaneRowe (EVPandCFO):

Thankyou,Pat.

I'dliketothanktheentireVMwareteamforalltheireffort--drivingresultsthisquarter.AsthisismyfirstearningscallasVMware'sCFO,IwanttostartoutbysayinghowpleasedIamtohavetheopportunitytojoinVMware.

AsCFOatEMC,IwasabletoviewVMware'sgreatprospectsataconsolidatedlevel.IdecidedtojointhisteambecauseVMwareisatauniquepointinitshistory,withsignificantfuturepotential.Inaddition,ithasthetrustofaloyalgroupofcustomersandpartnerswhorelyonVMwarefortheirmostimportantsoftwareinfrastructuredeployments.

AsPatindicated,Q1wasofftoagoodstarttotheyear,puttingusontracktoachieveourplanfor2016.I'llstartwithasummaryofP&Landbalancesheetitems,followedbyproductbookingsandguidance.

ForQ1,totalrevenuegrew5%yearoveryearasreported,or6%inconstantcurrency.Licenserevenuedeclined1%yearoveryearasreported,andgrew1%inconstantcurrency.

HybridCloudandSaaSrosetoover7%oftotalrevenue.vCloudAirnetwork,vCloudAir,aswellasAirWatchasaservice,madeupthebulkofthisgroup,whichgrewrevenueover20%yearoveryear.

Non-GAAPoperatingmarginwas28.1%anddilutednon-GAAPEPSwas$0.86pershareon424millionshares.Wecontinuetobuilduponthestrengthofourbalancesheet,withcashandshort-terminvestmentsatquarterendtotaling$8.2billion,upfrom$7.5billioninQ42015.Domesticcashwas$1.9billionatquarterend.




Totalunearnedrevenuewas$5billion,down2%fromQ42015.$1.8billionofthisamountislongterm.

Movingtobookings,thegrowthratefortotalrevenueplusthechangeinunearnedrevenuewas5%yearoveryear,or6%whenadjustedforcurrency,inlinewiththerevenuegrowthrateforthequarter.Thegrowthrateforlicenserevenueplusthechangeinunearnedlicenserevenuewas1%yearoveryear,or2%whenadjustedforcurrency,slightlyaheadofthelicenserevenuegrowthrateforthequarter.

Wesawstrongmomentumacrossourgrowthbusinesses,includingNSX,VSAN,End-UserComputing,andvCloudAirnetwork.Stand-alonevSpherelicensebookingswerelessthan35%oftotallicensebookings,downsignificantlyfrommorethanhalfofourbookingsjusttwoyearsago.

ThisisastrongindicatorofourabilitytodiversifyVMware'sproductportfolio,ascustomerscontinuetoseevalueandanexpandedsetofproductofferingsfromus,andaswebecomeamorestrategicpartnerwiththem.WewerealsopleasedwithourrenewalsinQ1,andexpecttoseecontinuedgrowththroughouttheyear,supportedbyastrongpipelineofrenewalopportunities.

TurningtoSDDC,ourSoftware-DefinedDataCenterproductsperformedwell,poweredbythestrengthofNSXandVSAN.

Totalcomputebookingsforthequartermetourexpectations,down1%yearoveryear.Computelicensebookingsdeclined10%yearoveryear,inlinewithexpectations,andinlinewithresultswe'veseenforthelastfewquarters.Managementlicensebookingsgrewinthemid-singledigitsyearoveryear,alsoinlinewithexpectations.

TurningtoNSX,wesawstrongmomentumcontinueinQ1,withNSXlicensebookingsgrowingover100%yearoveryear.NSXcustomersnowtotalover1,400,withnearly350oftheseinproductiondeployment.ThesedeploymentsareacrossawidevarietyofusecasesinthethreebroadcategoriesofITautomation,applicationcontinuity,andsecurity,whichincludesourmicro-segmentationcapabilities.NSXisprovingtobethepremiernetworkoverlaysolutionacrossanyhardwareinfrastructure.

OurHyper-Convergedsoftwareofferings,basedonVMwareVirtualSAN,continuetogainsignificanttraction.Althoughit'sstillearlyintheproductcycle,VSANlicensebookingsgrewover200%yearoveryear.WearepleasedtocloseourlargesteverVSANdealwithaglobalinvestmentbank.

Turningtohybridcloud,totalbookingsforvCloudAirnetworkgrewover25%yearoveryear.Weseesignificantinterestfromcloudandserviceprovidersaroundtheworldwantingtoutilizeourhybridcloudtechnologies.Forexample,asPatmentionedearlier,IBMwillbedeliveringacompleteSDDCofferingbasedonVMware'stechnologiesacrosstheirexpandedfootprintofclouddatacentersworldwide.vCloudAiralsoperformedwellinQ1,withlargeenterprisecustomeradoption.

End-usercomputinglicensebookingsgrewinthemid-teensyearoveryear,andtotalcustomeraccountincreasedtoover63,000,includingover1,300oftheglobal2,000.WebeganfurtherintegratingandaligningtheAirWatchmobileandHorizondesktopsalesforcesduringthequarter.Thisintegrationenhancesthestrengthofthecombinedteams,althoughitdidhaveanimpactonAirWatch-specificsalesincertaingeographiesastheteamsrampedup.

OurHorizondesktopbusinesshadstrongyear-over-yearlicensebookingsgrowthinthequarter,duetoincreasingcustomeradoptionofourintegratedfunctionalitywithintheHorizonsuite.DemandforEUCishealthy,with9ofourtop10dealsthisquartercontainingsomecomponentoftheseproducts.

NowI'dliketospendamomentonourstockrepurchaseannouncement.OurBoardhasauthorizedtherepurchaseprogramofuptoanaggregate$1.2billionfor2016.WeplanonusingallofthisamounttorepurchaseclassAsharesintheopenmarketduring2016.




Forregulatoryreasons,weexpecttobeginrepurchasingaftertheEMCshareholdervote.Webelieveasharebuybackisaprudentuseofourcashatthistime.

Forfull-year2016,weexpectstockrepurchaseswillincreasenon-GAAPEPSby$0.02pershare.Asaresult,weareincreasingourguidancefor2016non-GAAPEPStobetween$4.09and$4.18pershareonatotalsharecountof421milliondilutedshares.

Wearereaffirmingallotherguidancefor2016providedonourlastearningscallinJanuary.InJanuary,you'llrecallweguidedtotalrevenuefor2016between$6.785billionand$6.935billion;licenserevenuebetween$2.66billionand$2.76billion;andanon-GAAPoperatingmarginofapproximately31.5%.Cashflowfromoperationsisexpectedtobe$2.225billionfor2016,up18.5%versustheprioryear,andfreecashflowisexpectedtobe$1.98billion,up26.5%versustheprioryear.

ForQ22016,weexpecttotalrevenuebetween$1.66billionand$1.71billion,orup4%to7%yearoveryear.LicenserevenuesforQ2areexpectedtobebetween$623millionand$653million.Atthemid-point,thisisflatyearoveryear.ForQ2,weexpectnon-GAAPoperatingmargintobeapproximately29.8%,andnon-GAAPEPStobebetween$0.94and$0.97pershare.

Insummary,aswelooktotherestoftheyear,ourgrowthbusinessesareperformingwell,andofferingunparalleledvaluetoourcustomers.Ourbalancesheetisstrong.Thisyearweplantoreturn$1.2billiontoourshareholdersintheformofastockbuyback,andwewillleverageourbroadecosystemtobuilduponourpositionasoneoftheworld'stopsoftwarecompanies.

I'mlookingforwardtoengagingwithallofyou.Ourrelationshipwithyouisimportant,andwevalueyourongoinginterestinVMware.

Withthat,I'llturnthecallbacktoPaul.

PaulZiots (VP,IR):

Thanks,Zane.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

BrentThillwithUBS.

Unidentif iedPart icipent (Analyst-UBS):

Hello.ThisisactuallyMichaelonforBrent.Thanksfortakingmyquestions.

OneitemIwantedtorevisitinQ4,youtalkedabout2016bookingsgrowthpotentiallycomingin3%to5%aheadofwhererevenuegrowthis.IfwelookatQ1,thedynamicisalittlebittiltedfromthat.Iwaswonderingifyouhadanyadditionalcolororcaretoupdatethereaswell.


Hey,Michael.ThisisZane.

Yes,asyourecall,wedidmentionthatbookingsweexpecttocomein3pointsto5pointshigherthanourforecastfortheyear.Asyouheardinmypreparedremarks,weareontargetwithourforecastfortheyear,sowewouldexpectthatbookingsgrowthratetobethesameaswementionedtoallofyoulastquarter,sowewerereconfirmingourguidanceforbothrevenue,aswellasforthebookingsrate.





Overall,thataccelerationinthesecondhalfisdrivenbythegrowthofthenewproductareas,whichasyousaw,webeganwithstrengthinallofthoseinQ1.Andasthosegetlargerastheyeargoeson,wearecomfortabletheguidancethatwegave.

PaulZiots (VP,IR):

Thankyou,Michael.

Unidentif iedPart icipent (Analyst-UBS):

Thanks,Paul.

Operator :

JohnDiFucciwithJefferies.

JohnDiFucci(Analyst-JefferiesLLC):

Thankyou.

Pat,givenallthepotentialdisruptionthatcouldhaveoccurredatVMwarerecentlyduetotheleadershipchanges,itreallyseemsthecorecould'vebeenalotworsethanitwas,andyoucameinlineandmaybeshowedsomemodestlicensebillingsgrowth,whichisprettyimpressive.Myquestionis,whatdoesthismean?

Iassumeyoudidhavesomedisruption.Nooffensetotheteamthatisherenow,butCarlhadbeenthereforalong,longtime.Jonathanhadbeenthereawhile,Zaneisdoingagreatjob.Martin,theleaderofoneofyourpremier,ifnotyourpremiergrowtharea.Iwasjustsurprisedtosee,andactuallyalittlesurprisedtoseeyoumaintainingtheguidancehere,Zane.

Iguess,isanythingchangedoutthere?Orisitjustthateverybodyelsehasjuststeppedupandit'sjustbusinessasusual?


Well,wethinkontheexecutivesideitreallyisthecombinationofbeingabletoattractnewplayers.ImentionedRajiv,webroughtinaleaderforChina,Bernard,we'vebeenabletocontinuetoattracttalent.We'vealsohadacommentedonourverystrongbench,likeMaurizio,wehadbroughthimoverfromEuropeayearplusagotoprepareforthiseventuality,andsowehadbeengroomingandpreparingforthesetransitions.

So,Ithinkit'sacombinationofthestrengthofourbench,thestrengthofouremployeebasethatwehavetodayandthemomentumofthebusiness,ourattractivenessofpeoplebringingontotheteam.ButIjustsayoverallwe'vemanagedthroughthesetransitionshighlyeffectively,andI'mquiteproudofmyleadershipteamingettingthatdone.


John,thisisZane.

Iwouldjustaddtothatbeingoneofthenewermembersofthatteam.It'sanimpressivebenchthat'shereandacrosstheorganizationwe'redoingsomegreatthings.Soasyousee,evenonthegraphicresultsandyouseewiththeguidancefortheyear,wefeelveryconfidentinwhereweareandwherewereheadingfortheyear.





Thankyou,John.

PaulZiots (VP,IR):

Nextquestionplease.

Operator :

PhillipWinslowwithCreditSuisse.

PhillipWinslow(Analyst-CreditSuisse):

Hello.Thanksfortakingmyquestion.

Pat,thanksfortheincrementalcoloronthegoliveonNSXinadditiontothecustomercount.MyquestionisonNSX.WhenyouthinkaboutwhereyoustandafterQ1now,inthecontextofwhereyouseethisbusiness,itgoingoverthecourseof2016,Ijustwonderifyouwouldprovidesomecolorthere?

Thanks.


Generally,Q1forus,100%growthrateinthebusiness,we'recontinuingtoincreasethecustomercount.Customersgoingintoproduction.Youknow,someofthecustomers,aswell,thatwesaw,whilewedidn'thaveasmanybigdealsinQ1,weseeaverypowerfulpipelinefortheyear.Also,acrossgeos,acrossverticals,largeandmidsizecustomers.

WealsojustsayoverallNSX,we'rereallyexcitedaboutthepotentialandthetransformativecapabilities.AfewspecificsabigUSlifesciencescustomer,combiningitwithVDItodeliverthevirtualdesktopenvironmentinasecureway.TriZetto,ahugehealthcareITcompany,there'srealstrengthinhealthcare.

Microsegmentationoverallwaskiller.Youmight'veseen,Icommented,orIdemonstratednewareaslikedistributivenetworkencryptionattheRSAconference.Someveryprofoundnewcapabilities.Overall,thisisnowbeingunquestionablyseenasthepremieroverlaytechnology,theclearmarketleaderandunderlayenvironments,includingCisco,areincreasinglyseeingthisasacomplementarytechnology.

WehadacouplecustomerannouncedspecificallyhowtheyareusingNSXandACIenvironments,likeSugarCreekandShutterFly.Overall,thisisahotproductareaandonethatweseetremendousstrategicpotentialforinthelong-term.

PaulZiots (VP,IR):

Thankyou,Phil.Nextquestion,please.

Operator :

HeatherBelliniwithGoldmanSachs.

HeatherBellini(Analyst-GoldmanSachs):

Great.Thankyou.IwasjustwonderingifyoucouldgivealittlebitmorecolorontheEUCbusiness.MaybeImissedit,butAirWatchinparticular.Iknowthatwaslumpylastyear.60%constantcurrencygrowthin




thesecondquarter,thenitwentto20%inQ32015andwentbackupinthefourthquarter.Canyougiveusasenseofwhatyousawforthatbusiness,asimilarmetricforthatbusinessforthefirstquarterandwhatthebookingsrunratemightbenow?


Yes,sooverallwehadallinbusinesswasstrongforEUC.DesktopwehadastrongQ1andwebelievewecontinuetogainmarketshareAirWatchinQ1,whileitgrew,ithadahealthygrowthrate,itwasnotasstrongaswewould'vehopedfor.WedidinQ1,Heather,mergethesalesteams.ParticularlywithourWorkspaceOneannouncement,weareincreasinglysellingthecombinedsolutionofAirWatchidentityanddesktopasacompletesolution,sowedidundertakethestepofmergingthesalesteamsinQ1,whichdidcreatesomedisruptionintheAirWatchbusiness,particularlyinEMEA.

Overall,itwasstillverystrongperformanceinQ1.Big,bigcustomersarecomingourwayhugedealinJapanforbothdesktopandmobile,severallargetakeoutsofcompetitiveofferings,bothonthedesktopandonthemobileside.Particularstrengthinhealthcare.Overall,VMwarehadarealbarnburnerquarterinhealthcare,andalotofthatwasledbyEUC.Overallgrowthrates,strongdouble-digitgrowthratesoverallforthebusinessineachoftheparts.


Heather,Iwouldjustaddtothat.Youshouldexpecttohearustalkaboutthecombinationbecauseofthatonthefinancialside,aswell,fortherestoftheyear.It'sstill,obviously,alargecontributorinaggregateandabigpartofourgrowthbusiness.


Overall,therunrateandtheguidethatwesetoverall,wearecomfortablewiththatfortheyear.

Operator :

Thankyou.

PaulZiots (VP,IR):

Thankyou,Heather.Nextquestionplease.

Operator :

MarkMoerdlerwithBernsteinResearch.

MarkMoerdler (Analyst-Bernstein):

Thankyouverymuch.GivenhowhybridcloudandSaaSrevenuegrewnicelythisquarter,canyougiveusamorecolor?HowshouldwethinkaboutvCloudAir,specificallyhowyoumonetizeitbythepartners,whattheopportunityisasyouseeit?


Yes,soletme--I'llstartandaskZanetoaddjustontheoverallfinancialmetric.WearemonetizingvCloudAirandvCloudAirnetwork.Andaswecommentedinourformalcomments,vCloudAirhadverygoodperformanceinQ1.It'sonourexpectationfortheplanfortheyear.

Iwasreallypleased,youknow,despitesomeofthedisruptionsinthatbusinessarearightaswewentthrough,isitoutorisitinthelatelastyear.Theteamreallysteppedup,andIwasquitehappywiththeiroperationalperformanceinQ1.




ThesecondwaythatwemonetizethattechnologyisthroughthevCloudAirnetwork,andthisisreally--wedevelopedacoreintellectualproperty,andthenweamplifyitthroughourserviceproviderpartners,whichwecontinuetosignupmorepartners,andbecauseit'saveryhealthyareaofourBusiness.Wehave4,200partnersnowinover100countries.Thatbusiness,thevCloudAirnetworkbusinessgrewover25%yearonyearinQ1,soveryhealthygrowththere.

Wealsosawthat--andforusastheycontinuetogrow,theyusemorevSphere,butweareincreasinglygainingpenetrationofothertechnologiesinthat.Forinstance,TelstrawithNSX,VirtustreamwithNSX,NaviSite,abigDaaSopportunitythattheyaretakingadvantageof.Sothey'reusingmoreofourportfoliointheiroffering.

AndofcoursethebigthingthatwedidinQ1wastheIBMpartnershipannouncement.Webelievethat,youknow,IBMhasalreadyclosedanumberofdealsbasedonthat,andthetremendouspipelineofopportunity,whichisthebiggestincrementalamplificationopportunitythatwe'veevertalkedaboutinthevCloudAirnetworkarea.


Mark,Iwouldjustaddtothatasyouthinkabouttheforecastfortheyear.Ineachofthesecategories,we'vementionedthatvCloudAirisslightlyaboveourexpectations.Thesecategoriesarestillgrowthcategoriesforus.vCANandAirWatchSaaSbeingtheprimarycontributorsofthegrowthfortheyear.

PaulZiots (VP,IR):

Thankyou,Mark.Nextquestion,please.

Operator :

KeithWeisswithMorganStanley.

KeithWeiss (Analyst-MorganStanley):

Thankyoufortakingmyquestion.

Iwaswonderingifyoucouldgiveusalittlemorecoloronthelarger,morestrategicELAdeals,somethingasyousaidbreakout.GiventhechangesgoingonintheCompany,areyoucontinuingtobeabletosignthesamelevelofthosestrategicdealsasyouwerehistorically,oristhereanyhigherimpactonthosetypesofdeals?


Overall,andpersonally,I'vebeeninallthreegeosinQ1visitingbigcustomers,spendingtimewithoursalesteamsoverall.Generally,I'dsayweremainquitecomfortablewithourabilitytocloseELAs,andwithCarl'stransition,heremainsarainmakerforusinhisconsultancyrole,sowecontinuetogainthatbenefitevenasMaurizioandoursalesleadersaroundtheworldstepup.

WedohaveaverylargeELArenewalopportunitythisyear,notasmuchinQ1butinQ2inthesecondhalf,it'saverylargeopportunity.Wedoseethatwearewell-positionedtocontinuetohavestrongrenewalsandournewproductsgoingintothoseELArenewalsasdemonstratedbythegoodperformanceinthoseareasinQ1.

Overall,wefeelcomfortable,ourabilitytodothatandourstrategicrelationshipwithourcustomerscontinuestogrow.Youknow,they'reseeingtheshareofwalletopportunitiesintoday'sdatacenterisincreasingthevaluewedeliveraswellasourvisioninthemulticloud,multidevicefuturebindingustostrategicallytheproblemstheyneedtosolvefortomorrow.Overall,wefeelquitecomfortable.





Keith,Iwouldjustaddthat,obviously,asyousawintheslidesweprovided,ELAswere29%ofourtotalbookings,whichisinlinewithwherewewerelastyear.AsPattouchedonwithbreadthoftheportfolio,nineofthetop10dealsincludedEUC,eightofthetop10includeNSX,andthreeofthetop10includeVSAN.AndofcoursewehadgreattransactionalperformanceonVSAN,aswell.Wefeelquitegoodaboutwherewearepositionedhere.

PaulZiots (VP,IR):

Thankyou,Keith.Nextquestion,please.

Operator :

GreggMoskowitzwithCowenandCompany.

GreggMoskowitz (Analyst-CowenandCompany):

Thankyouverymuch.

Lastquarter,Pat,youmentionedthatweaknessChina,Russia,andBrazilcausedatwo-pointheadwindtobookingsintheaggregate.Iwaswonderingwhattheimpactwasthisquarter.AlsoforZane,anychangesquarteronaveragedurationforeitheryourEAsorforyourmaintenancecontracts?

Thanks.


Sure,Icanactuallytouchonbothandmaybetalkcolor…


…onthegeos.


Ontheheadwind,asyoumentioned,lastquarterwementionedtwopointsofheadwindsforBrazil,Russia,andChinaspecifically.Whilewestillsawadditionalheadwind,it'sactuallymoderatednow,soit'slessthanhalfapointofheadwind.And,aAsyouwouldexpect,theteamsareworkingoneachofthoseregionsandworkingandimprovingtheperformance,butnotassignificantthisquarterandyear-over-yearasweexperiencedlastquarter.


Overall,youknow,weretakingstepsineachofourgeostoaddressthenewrealitiesofthosemarketsrespectively.HavingjustbeeninChina,justgotbackfromChinaonFriday,feelverygoodaboutournewleadership,thestrategythat'sformingwiththem.WejustannouncedanewjointventurewithSugon.Wehadcommunicatedtheintenttodothat.Wejustlaunchedthatlastweek.

SoIfeellikewe'regettingourlegsbackunderusandthat,theworld'ssecond-largestITmarket.Wearetakingstepstoaddressit,butitremainsaheadwindandit'sfactoredintoouroverallbusinessoutlook.


Greg,I'lladdonemorepoint.IknowyouhadaskedaroundtheaveragelengthofEAs,andthosehavenotchanged.Weremainatjustoverthreeyearsforaverageduration.




PaulZiots (VP,IR):

Nextquestion,please.

Operator :

MarkMurphywithJPMorgan.

MarkMurphy(Analyst-JPMorgan):

Thankyou.

Myquestionwasactuallyjustaskedbythepriorperson,soIwillreturntothequeue.Thankyou.

PaulZiots (VP,IR):

Allright,Mark.Nextquestion.

Operator :

MichaelTuritswithRaymondJames.

MichaelT urits (Analyst-RaymondJames&Associates,Inc):

Hello.Let'stalkaboutpubliccloudalittlebit.AcouplequartersagoCarlhadmentionedtherewassomehesitancyinbuyingaspeopletrytoevaluatepublicversusprivatecloudoptions.Myquestion,hasthatchangedany?Doyoufeellikepeoplearereadytomoveforward?

Andarelatedquestion,sinceyou'vechangedyourstrategysomewhat,ormodifiedittobemoreorientedtowardsvCloudAirnetworkversusvCloudAiritselfandVirtustream,howhasthecustomerreactionbeenthere?


Yes.

Soontheside,youknow,clearly,ourstrategythatwe'velaidout,ourmulti-cloudstrategyisthreeparts.Continuetohelpcustomersbuildprivateclouds,extendthatintothepubliccloud,thatSDDCstackintothepubliccloud,andthirdisprovideauniquecontrolplanetomanage,run,secure,andconnectacrossanycloudonanydevice.

Andthatcomprehensivestrategyaswe'vedescribeditengagedwithcustomersaroundit.I'llsayeverycustomerengagementyouhaveadiscussionofcloudbecausethey'retryingtofigurethatstrategyoutaswellandhowtheyneedtoevolvetheirITinfrastructureandapplicationplansinthatregard.

Andaswe'vedescribethatandengagewithcustomers,aregrowingcomfortthatweareatechnologypartnerthatbothhelpsthemtransformtoday,butalsohelpsthembuildabridgetotomorrow.Sowefeelquitegoodthatthestrategicevolutionthatwe'vegonethroughisnowresonatingquitewellwithourcustomers.Clearly,goodperformanceinQ1reinforcesthat.

Youknow,theannouncementsthatwemadearound,forinstance,ourmanagementbeingrealized,beingabletomanageworkloadsinAWS,andwe'llrollthatoutforAzureshortly.NSXonmultiplecloudshasbeenwellreceivedbythemarketplace,theRSAannouncementofourdistributornetworkencryptionhasresonatedextremelywell.IalreadymentionedtheIBMSDDCpartnershipthatweannouncedhasalsogottengoodresponse.




Overall,wereallyfeelitwemadealotofprogressinthisregard.Atthehighestlevel,customersaregoingonajourney.They'regoingonthejourneytothemulticloudfuture.They'repickingstrategicpartnersforthatjourney.

Fromafinancialperspective,weclearlyhaveashareofwalletopportunityintoday'sinfrastructureonpremise,butwearelayingoutaclearpathforcustomersbeingabletomonetizeandbenefitfromthenewvalueandtakingadvantageofcloudsfortomorrow.

PaulZiots (VP,IR):

Thankyou,Michael.Nextquestion,please.

Operator :

KashRanganwithBankofAmerica.

NikolaiBeliav(Analyst-BofAMerrillLynch):

Hello,thisisNikolaiBeliavonbehalfofKash.Canyoupleasegiveusanupdateonyourtractionwithyourproductbasedoncontainersandopenstack?

Thankyou.


Yes.Let'sseparatetheanswers.Let'stalkaboutopenstackfirstandthenI'lladdresscontainers.

Youknow,ontheopenstackside,whatwe'veseenisthatthere'sbeenadecidedshiftaroundopenstack,andwe'reseeingnowarepeatedpatternwherecustomershaveattemptedtotakeadvantageofotheropenstackdistributionsorotheropen-sourcealternativesforopenstack.

Andafterinvestingsignificantlyinthoseattempts,tensofengineersovermanyquarters,they'vebeenunabletogetascalablereliablesolutionworking,andthosecustomersarecomingbacktoVMwareandwe'reabletocomeinwithourVMwareintegratedopenstackofferingandliterallyinhoursordayshaveanenvironmentthat'sup,running,builtontherobustVMwareingredients.

We'veseenthisrepeatedpatterninadditiontothetensofcustomersthatwe'vealreadytalkedabout,majorathleticretailerintheUS.ThisquarterweaddedkeywinswiththewirelessproviderinEMEA,abigtelcointheMiddleEast.AbighightechinSiliconValleyismovingawayfromtheiropenstackandbacktoVMware.SothispatternoftheimmaturityofopenstackcomingtotheVMwareingredientsisnowwellseeninoursalesandweseeagoodpipelineofthoseopportunitiesfortheyear.

Onthecontainerside,containersremainafairlyimmaturetechnologywithhugeinterestintheindustry.Andagainstthatinterestthere'sanincreasingamountofhowdoIdevelopandtakeadvantageofthis,andI'llsaythere'sagrowingconsensusthatasthekeypartofhowpeopledeveloptheirapplicationsinthefutureandtheecosystemisbuildinginthatdirection.

Andwhileimmature,VMwarehasclearlyembracedandweareaggressivelydeliveringasetofsolutionstoenablecustomerstohaveaninfrastructurethatiscontainer-ready.Andwe'redoingthatintwoways.OneisourVMwareintegratedcontaineroffering,whichallowsefficientuseofcontainersontoday'svSpherebasedenvironmentstoday.ItallowsITtojustsayyestotheirdevelopersandcontainerswithoutchangingnetworking,policy,security,ormanagement,averyefficientwaytogetstarted.

AndthenthesecondofourstrategyisPhoton,andforthatisreallybuildingagrounds-upenvironmentthat'soptimizedforthatcontainerfuture.Andwe'llbehavingsomekeyannouncementsaroundthatin




thenearfutureofourPhotonofferingsinthemarketplace.Andbothofthose,again,we'reengagingwithcustomersandgettingalotofinterest,sowhileearly,alotofhypearoundit,weseethisasaveryimportanttrendfortheindustryandVMwarewillbetherewiththeinfrastructurethatourcustomersrequiretotakeadvantageofit.

PaulZiots (VP,IR):

Thankyou,Nikolai.Nextquestionplease.

Operator :

IttaiKidronwithOppenheimer.

IttaiKidron (Analyst-Oppenheimer&Co):

Thanks,acouplequestionsforme.OneonvSphere.

PaulZiots (VP,IR):

Justonequestion,please.


Okay,we'llcorrelateit.SoonvSphere,cangetusasenseonwhenandhowyouthinkthedeclineinlicensebookingsinvSphere?Wheredowebottomonthis?Andrelatedtothat,againwhatisthetimelinebywhichyouthinklicensegrowthcouldreturn?


Licensegrowth?


OveralllicensegrowthfortheCompany.ClearlyvSphereisdecliningandweighingandthenewproductsgrowingonthemix.Whencanwegetthewholeboataltogethermovingintherightdirection?


Ittai,I'llstartthat.ObviouslyonthevSpheresidewe'vementionedthatatleastforthisyearweseeconstantandpredictabledeclineaswe'velaidoutinthefirstquarterfortheremainderoftheyear,andthat'showviewtheremainderofthisyear.We'llbeupdating2017alittlebitlateroninthisyear.Asyouthinkaboutaggregatelicensegrowth,aswe'vetouchedon,andasyoucanseewithourperformance,withourgrowingpartsofourportfoliowe'reencouragedbythebookingtrendandtheaggregatebookingtrendthatweseethroughthecourseoftheyear.

Butwe'llupdateyoufor2017andbeyondalittlebitlateronintheyear.


AndI'djustadd,that'sexactlywhyinourlastcall.Ittai,wereferredtothisasthetransitionyear.It'swhenthenewproductbookingareasmorethanoffsetthecomputelicensedecline.Overallaswe'vesaid,it'sabout10%inQ1,consistentwithourmodelingandexpectations.

Overall,computewasapproximatelyflatandthenewareasaregrowingverywell,andwegavequitespecificguidanceonthoseareasandupdatesinQ1.SoweremainquitecommittedtotheaccelerationofbookingsaswegothroughtheyearandwethinkitsetstheCompanyupforgrowthintheyearand




2017andbeyond.

PaulZiots (VP,IR):

Thankyou,Ittai.Nextquestionplease.

Operator :

NehalChokshiwithMaximGroup.

NehalChokshi(Analyst-MaximGroup):

Yes,thanksfortakingmyquestion.

Couldyoutalkaboutthesalesandmarketinginvestmentinthequarter?Thatwasup4%year-over-year,whereasyourOpExwasupalittlebitmore.Soitseemslikeyou'redecidingtoinvestinR&Dalittlebitmore,grosswinssalesandmarketing.Canyoucommentonwhyyou'rechoosingtodivvyuptheOpExinvestmentsthatway,intermsoftheyear-over-yeargrowth?


Sure,Iwouldencourageyounottolookatanyonelineitemaswelookatthequarter.Wewentthrougharealignmentinthequarteraswerealignedanumberofourresourcestowardsourgrowthproductsandgrowthopportunities.WehavebeeninvestinginR&Dheavily,andasyouwouldexpectwe'reencouragedbywhatwe'reseeingthere.Sowe'repleasedwithtrend.Iwouldn'tlooktoomuchintoanyoneparticularquarter.Wehavemaintainedourguidancefortheyearonouroperatingmargins,sowefeelgoodaboutwherewe'llendupfortheyear.

PaulZiots (VP,IR):

Thankyou,Nehal.Nextquestionplease.

Operator :

AbheyLambawithMizuhoSecurities.

AbheyLamba(Analyst-MizuhoSecuritiesCo,Ltd):

Thankyou.

Pat,IthinkyoumentionedontheELAopportunityexulvatinginthesecondhalfoftheyear.Whatareyourassumptionsforcustomers'willingnesstosignlongertermcommitments?Iunderstandyou'renotseeinganimpactonduration.Durationwasconsistentthisquarter.Butitwouldbehelpfultoseewhatyourplanningassumptionsarefortheupcomingrenewals.Andifthere'sanybehaviouraldifferenceamongstlargecustomersversusSMBswhenitcomestoELAs.

Thankyou.


I'dtellyouafewthingsandthenI'daskZanetoaddperspective,aswell.Overall,Q2secondhalf,theELArenewalopportunityisaverylargeopportunityforus,giventheperformancethatwe'vecontinuedtoseethatwe'reabletohaverenewalvalue,equalorgreater.We'realsoabletomaintainduration,highrenewalrates.Overall,everyaspectofourbusinessrelationshipwithourcustomersseemshealthyinthatrespect,andwe'venotseenanyfundamentalsignsthatwe'reunabletocontinuethattrendforward.




Andparticularly,giventhebreadthandstrengthofthenewproductareas,we'rebringingalotmoretothetableaswehavethoseELArenewaldiscussions,solvingmanyoftheirmulti-cloud,multi-deviceopportunitiesforthefutureandpresentingtransformationaltechnologiestosolvesomeoftheirproblems.Soweareseeingthosetoberobustdiscussionswithcustomersandnothingthatwe'veseensofarwouldindicatethatwe'reunabletocontinuetomaintainthosekindofmetricsthatwe'vebeengivingyounowforquiteanumberofquarters.


AndIwouldadd,obviously,that'sincludedinourguidance.Weseethevolumeofrenewalopportunitiesincrease,andobviouslyexpecttheratetomaintainatitshighlevelalready.AsImentionedearlier,wedoalsoexpecttheaveragedurationtostayaroundthesame,whichwasthreeyears.Aswethinkaboutthatguidance.NowthisalsowithsomeoftheSNSinvolvedinthoserenewals,thisispartofwhywe'reencouragedbythatbookingsrampthatwillexceedtherevenuerampfortheyear.

PaulZiots (VP,IR):

Thankyou,Abhey.Nextquestionplease.

Operator :

RajeshGhaiwithMacquarie.

RajeshGhai(Analyst-MacquarieResearchEquities):

Thanks.

Myquestiononleaseend.Ithinkitwas[Vasey]sharedabouttheproduct,3,500customers,200%growth.Incomparisonwiththeinstalledbaseofover500,000customersyouhave,andalsothestrongseculartrendthatwe'veseenhydroconvergedinfrastructure.Myquestioniswhatwouldyoudo,ifanything,tochangeyourstrategytoaddressandthatopportunitybetter,orbemoreeffectiveinpenetratingthatopportunity?


WellI'dsaywe'reprettythrilledwiththemomentumwesawinQ1.PartofitisI'llsay,andhavingbeenthreeyearsatEMCasastoragecompany,partofitisitjusttakesalottogetastorageproductmature.Right?Andthat--wehavecrossedthetwoyearcycleonVSANnow,the6.2releaseasIwouldsay,checksalltheboxeswithregardtokeyfeatures,capabilitiesandsoon,andweareI'llsay,rightonschedule.We'reseeingtheinflectionpointonthatbusiness.Andthe6.2releasereallyhitthemarkinthemarketplaceverywell.

Youknow,andwe'dsaywe'reclearlynowseenasnumberoneinthehyper-convergedinfrastructurespace,andthatsoftwarecategorywethinkisgoingtocontinuetoreallyemergeasapowerfultrendintheindustry.Wealsoareveryhappytoseequiteanumberofdeals.IthinkZanementionedalargefinancialservicescompany,wehadalargeEMEAretailer,alargeconsumersgoodsmanufacturer,alargeequipmentenginescompany.Andeachoneoftheseisreallydemonstratingthepowerofthetechnology.Wealsohadtransactionalbookingsaswell,soitwasn'tjustinbigdeals,butalsotransactionalperformancewasgood,sothechannelparticipationisincreasinghere.

SowereallyleftQ1feelingreallygoodaboutthisarea,andIamquitebullishaboutitsgrowthpotentialthroughtheyearand2017andbeyond.

PaulZiots (VP,IR):




Thankyou,Rajesh.Ithinkournextquestionisthelastquestioninque,sowe'lldoonemorequestion.

Operator :

JasonNolandwithRobertBaird.

JaysonNoland (Analyst-RobertW.Baird&Company,Inc):

Okay,thankyou.Pat,asmuchasyoucantalkaboutit,I'dliketoaskaboutanupdateonDellasitrelatestotiming.Andthenmaybeanyrecentcustomerfeedbackyou'veheard.Iknowyou'vecalledoutSMBasarevenuesynergyopportunity.


Somaybeontiming,Zane,you'lldothatandI'llcommentoncustomersandsynergy?


Sure,onthetimingsidethingsaregoingaccordingtoplan.Ithinkyou'llprobablyhearmoretomorrowontheEMCcall,becausethey'reclosertothatelementofit,buteverythingisgoingaccordingtoplanbestwecantell.


Andonthesynergysideofit,we'veindicatedthesynergyopportunityisverysignificanthere.We'vespentagoodamountoftimeworkingwithourDellcounterparts,reallygrindingthroughthedetailsofthat.AndweseesomeofthoseareasarestartingtomaterializeintermsoftheoperationalcharacteristicsandtheVxRailannouncementbyDellisagoodexampleofthatthisquarter.

Wealsoarebeginningtodevelopaclearviewofmanyoftheopportunitiesthatwecanactionpost-close,aswell.Sowedofeelgoodaboutthesynergyopportunity.WithregardtocustomersandpartnersaroundDell,whatwewouldsayisthattherewas--inQ4therewasjustastonishment.Thisisthebiggestdealinhistory.Peopleimmediately,whatdoesthistoaffectme?AndfairlyquicklyinQ4,peoplegotbacktobusinessanditwaslikeafterThanksgiving,wegottobusiness;wedeliveredasolidQ4.ThatclarityandmomentumhascontinuedintoQ1.Clearlyit'sadiscussiontopicwithcustomers,butnowit'sverymuch,it'saquicktopic,right?Itisn'tthetopictocoverwiththem.

Wealsojustcompletedourpartnerleadershipsummit,withessentiallyisthetoppartnersthatwepulledtogethertoreallytalkaboutVMwarestrategyforthefuture,andwehaveallofourchannelpartnersaswellasOEMpartnersthere.AndweinvitedMichaelDelltoparticipateinthattoreallyanswertheclarityofhisintentandstrategywithrespecttoVMware,anditwasarobustconversationashewasaddressingthequestionsofourkeyOEMpartnersfirsthand.

Itellyou,weleftthatpartnerleadershipconferenceveryencouragedbytheongoinghealthandopportunitythatwehaveoverallfortheVMwareecosystem,andreallyquiteoptimisticthattheyareseeingthemomentumofournewproductareas.AndthatisclearlyseenintheQ1resultsandlookingforwardtothelongterm.

PaulZiots (VP,IR):

Thankyou,Jason.

Beforeweconcludethecall,IthinkPathadafewfinalcomments.





Yes,thankyou.It'saverygoodstarttotheyear.We'reincreasinglyconfidentinourstrategyandoptimisticaboutthemomentumwe'reseeing.Giventhisconfidencewe'realsopleasedwithourplantorepurchase$1.2billionofstockin2016.Asalways,wethankyouallforyourtimeandinterestinVMware.

Operator :

Ladiesandgentlemen,thisdoesconcludetoday'sconference.

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