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EMC/VMW Acquisition By Cisco Imminent?

February 12, 2009 by Robin Wauters 2 Comments

Great field work on Virtualization.info today about the fact that investors are buying heaps of VMware stock, signalling that something is up.

A small excerpt:

Monday’s SEC filings shows that Cisco posted a prospectus on raising $4 billion in senior bonds. The book building is run by all the major investment banks and is closing on February 17.
Cisco must be really confident for such a major issuance in these market conditions, but Standard & Poors is giving the senior unsecured notes an A+ rating with a stable outlook.
Cisco will use $500 million of the $4 billion to repay short term debt. When combined with sizeable cash holdings, this leaves them with with $4.7 billion in cash at the US parent company. According to CNET that amount excluded cash holdings at subsidiaries overseas.

VMware: Fourth Quarter Disappointing But Still Better Than Expected

January 26, 2009 by Robin Wauters Leave a Comment

VMware today announced financial results for the fourth quarter and full year 2008.

Revenues for the fourth quarter were $515 million, an increase of 25% from the fourth quarter of 2007.
GAAP operating income for the fourth quarter was $102 million, an increase of 34% from the fourth quarter of 2007. Non-GAAP operating income for the fourth quarter was $135 million, an increase of 25% from the fourth quarter of 2007.
GAAP net income for the fourth quarter was $111 million, or $0.29 per diluted share, compared to $78 million, or $0.19 per diluted share, for the fourth quarter of 2007. Non-GAAP net income for the quarter was $142 million, or $0.36 per diluted share, compared to $103 million, or $0.26 per diluted share, for the fourth quarter of 2007.
Revenues for the full year 2008 were $1.9 billion, an increase of 42% from 2007.
GAAP operating income for the full fiscal year 2008 was $313 million, an increase of 33% from 2007. Non-GAAP operating income for the year 2008 was $469 million, an increase of 39% from 2007.
GAAP net income for the full fiscal year 2008 was $290 million, or $0.73 per diluted share, compared to $218 million, or $0.61 per diluted share, for 2007. Non-GAAP net income for the year 2008 was $416 million, or $1.05 per diluted share, compared to $295 million, or $0.82 per diluted share, for 2007.
Cash was more than $1.8 billion and deferred revenue was $870 million as of December 31, 2008. Since the beginning of 2008, cash increased 50% and deferred revenue increased 57%.

U.S. revenues for 2008 grew 37% to $988 million from 2007. International revenues grew 48% to $893 million from 2007.

License revenues for 2008 grew 30% to $1.2 billion from 2007. Services revenues grew 67% to $703 million from 2007.

(Release)

For analysis, read Tech Trader Daily and Between The Lines.

Intel Cuts VMware Stake In Half

November 4, 2008 by Robin Wauters Leave a Comment

While Cisco is increasing its stake in VMware, Intel is reducing it. The company plans to sell the bulk of those shares on Tuesday, according to a regulatory filing.

Intel disclosed that it had recently sold 1 million shares in the virtualization software maker and plans to sell another 3.75 million VMware shares on the open market “approximately” on Tuesday.

The chipmaker originally paid $23 per share for the stock in a private placement. VMware shares hit a record high of $125.25 on October 31, 2007, after going public in August that year at $29 per share.

Shares of VMware, which is majority-owned by EMC, fell nearly 4 percent before recovering to trade up 0.53 percent at $31.98 in morning trade on the New York Stock Exchange.

Quest Software Intends To Buy Up to $400 Million of Its Common Stock

October 10, 2008 by Robin Wauters 1 Comment

Quest Software recently announced that its board of directors has authorized a modified “Dutch auction” tender offer to repurchase between $135 million and $400 million of its common stock at a price per share expected to be not less than $13.25 and not greater than $15.50.

Based on the midpoint of the price range, this would represent between 9 percent and 26 percent of the shares of Quest common stock currently issued and outstanding. The company anticipates obtaining debt financing in an aggregate principal amount of up to $300 million to provide financing for a portion of the repurchase. If Quest is unable to secure such financing on acceptable terms, Quest still expects to proceed with the tender offer or to commence an open-market repurchase program, but the repurchase would be funded from cash on-hand, subject to applicable California corporate law limitations, and the aggregate size of the repurchase would likely be at the low end of the range stated above.

In light of the recent extreme volatility of trading in the company’s common stock and because the size of the prospective tender offer has yet to be determined, the company’s board of directors will decide the actual price range for the tender offer when such offer is commenced based on all of the circumstances at that time. Quest intends to commence the tender offer or other repurchase program and to announce the final number of shares, the timing and other details of the offer or other program later this month.

The modified “Dutch auction” would allow Quest’s shareholders to tender some or all of their shares at a price within the specified range. Based on the number of shares tendered and the prices specified by the tendering shareholders, Quest will determine the lowest price per share within the range that will enable it to purchase the total number of shares subject to the offer, or such lesser aggregate amount of its common stock that is properly tendered. All shares accepted in the tender offer will be purchased at the same price per share even if a shareholder tendered at a lower price. Vinny Smith, executive chairman of Quest, intends to tender three million shares in the tender offer, which constitutes approximately 9% of the shares beneficially owned by him. We cannot yet determine the extent to which our other directors and executive officers may participate in the tender offer.

With the assistance of the company’s executive management and outside advisors, Quest’s board of directors has evaluated the company’s operations, strategy and expectations and has determined that repurchasing a portion of Quest’s shares of common stock is a prudent use of the company’s financial resources. Quest believes that its current stock price levels do not reflect the current performance or long-term growth prospects of its business. Accordingly, Quest believes that an investment in its own stock at the range of offered prices represents an attractive strategic transaction.

The tender offer, when commenced, will be subject to a number of terms and conditions, including any applicable corporate and regulatory requirements and, in the event of a leveraged tender offer, the receipt of financing described above, all of which terms and conditions will be specified in an offer to purchase to be filed with the Securities and Exchange Commission on the date the offer is commenced.

Wachovia Analyst Downgrades Ratings for VMware (VMW)

October 6, 2008 by Robin Wauters Leave a Comment

Wachovia’s Philip Rueppel this morning was the latest analyst to take a machete to his EPS estimates for the software sector, reducing numbers for most of the companies he follows.

“We are reducing estimats for a majority of companies in our universe, as we believe typical Q4 budget-flush will be muted this year, and growth prospects for new licenses next year will be muted,” he writes.

As part of his call, Rueppel downgrades his ratings on VMware (VMW) to Market Perform from Outperform, asserting that the company has “particularly acute issues due to their customer base segmentation, and/or growth expectations.”

In today’s trading VMware is down 67 cents, or 3%, to $21.90.

Trading Activity In NetApp, VMware Spikes

August 28, 2008 by Robin Wauters Leave a Comment

According to a report from the Wall Street Journal, stocks of both NetApp and VMware have been trading at unusual volumes yesterday.

Trading in NetApp spiked to four times the normal level, with investors picking up 38,000 calls that allow them to buy the company’s stock and 5,000 puts that allow them to sell it. NetApp shares closed at $25.55, up 6.1%.

Fueling activity in VMW trading was the recent chatter that Cisco could be interested in acquiring VMware. With calls outnumbering puts by seven to one, traders gravitated to September $45 calls. The contracts are priced at 70 cents and make money if VMware shares jump above $45.70.

They closed at $38.49, up 4.1%.