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VMware Reports Slowest Revenue Growth in Seven Quarters

Sluggish IT spending, currency effects are factors.

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Virtualization software maker VMware reported its slowest revenue growth in seven quarters as IT spending remained sluggish and a stronger dollar reduced the value of overseas sales.

But the 11 percent increase in total revenue met Wall Street’s expectations, and earnings exceeded analysts’ projections. The stock was largely unchanged in after-hours trading.

The company’s virtualization software enables the creation of a virtual machine that acts like a real computer with an operating system, helping users to store data more efficiently and cut IT costs.

“While Street expectations were not lofty heading into earnings, VMware continues to have challenges in its quest to show strong top-line growth given IT spending and competitive headwinds,” FBR Capital Markets analyst Daniel Ives said.

Revenue from services for the quarter ended March 31 rose about 17 percent to $935 million. Total revenue rose 11.1 percent to $1.51 billion. Excluding the impact of currency, revenue rose 13 percent.

Net income fell slightly to $196 million, or 45 cents per share, from $199 million, or 46 cents per share.

Excluding items, the company earned 86 cents per share. Analysts on average had expected profit of 84 cents on revenue of $1.5 billion, according to Thomson Reuters I/B/E/S.

Reuters had exclusively reported in February that its parent, EMC, had decided against spinning off its majority stake in VMware after reviewing the idea over several months following pressure from activist investor Elliott Management.

Up to Tuesday’s close, shares of the company had fallen about 18 percent in 2015.

(Reporting by Sweta Singh and Arathy S Nair in Bengaluru; Editing by Saumyadeb Chakrabarty)

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