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VMware has pinned high hopes on its vCloud Air hybrid cloud, the company’s response to public cloud competitors like Amazon Web Services. But there’s not a ton of information on just how well that cloud is doing in the market.
Those hoping for more details on the company’s fourth quarter conference call Tuesday night had to make do with this:
The category containing vCloud Air — VMware’s hybrid cloud and SaaS products — made up “just under five percent” of total revenue but showed a year-over-year growth rate of 100 percent, according to CFO Jonathan Chadwick. That would put revenue for that segment at about $85 million out of total revenue of $1.7 billion for the quarter ending December 31, 2014.
Chadwick also cited a new vCloud Air deal with”one of the largest pharmaceutical companies looking to shift their current on premise infrastructure to a hybrid model.”
[company]VMware[/company] thus becomes the fourth legacy IT company in two weeks — after IBM, Microsoft and [company]SAP[/company] — to prompt worries that the sales of shiny new stuff like SaaS and cloud is not close to replacing the dough generated from legacy cash cows that still sell a ton but whose growth is slowing. In VMware’s case the cash cow would be vSphere and related virtualization gear that companies use to run their own data centers and server rooms.
Perhaps worse is that sales of the new stuff will cannibalize sales of the old stuff, which makes Wall Street nervous.
On the call, VMware CEO Pat Gelsinger stressed vCloud expansion over the past year — adding a new region in Australia in November, for example.
The worry among VMware partisans is that the company, as profitable as it is (it logged a profit of $326 million in Q4, down from $335 million the same time a year ago) cannot build out cloud on the scale the way [company]Amazon[/company] or [company]Microsoft[/company] can. To achieve that sort of scale, VMware hosts vCloud Air itself for large customers but also fields a network of third-party providers that offer vCloud Air. That gives it more scale but also sets up a scenario in which it is competing with its own service provider partners.
vCloud Air debuted in the summer of 2013 so it’s playing catchup with 9-year-old AWS. But, like Microsoft, VMware has tons of enterprise accounts and it’s banking that those companies will feel more comfortable using VMware’s enterprise-oriented cloud over a pure public option.
For more on VMware’s cloud strategy, check out VMware Cloud EVP Bill Fathers’ talk at Structure 2014.