Summit Research Sees Slightly Better Results But Soft Guidance For VMware

In a report published Wednesday, Summit Research analyst Richard Williams reiterated a Hold rating and $88.00 price target on

. In the report, Summit Research noted, “VMware reported a slightly better quarter, with topline $18m ahead of our estimate and $13m above the Street. EPS was 4 cents better at $0.87 than our and the Street consensus. We saw modest improvement in some metrics like services, maintenance and total revenues, but with underlying deceleration in areas such as LT deferreds and bookings. "Growth rates y/y were inline with recent periods at 17.5% y/y in 3Q but licenses (13.3%), bookings (13%) and OCF (-4.9%) were weaker. Management expected a strong 3Q in ELAs, especially from the Federal government, but were disappointed from a large deal that slipped and less activity than anticipated. NSX/hybrid cloud reportedly had strong results in 3Q, but remain limited in impact on the bottom line (NSX now has 250 customers versus 500k for virtualization). The stock remains fully valued for us at 18x EV/FCF on OCF growth of -4.9% y/y in 3Q and expected growth of less than 5% for FY14, compared to high-growth peers at 16.9x and large caps at 10.9x. Reiterate Hold rating and $88 price target.” VMware, Inc. closed on Tuesday at $88.19.