VMware CEO talks life after Dell as spin off nears completion

VMware CEO Raghu Raghuram talked up the company’s growth prospects and doubled down on its software-as-a-service (SaaS) and multi-cloud strategy, as its impending spin off from parent company Dell Technologies neared its close.

During an analyst event, Raghuram said the transaction is on track to wrap in “early November” and hailed the separation as a “great” move for VMware. “It truly makes us the Switzerland of the industry,” he explained. “Partners that were previously hesitant to partner deeply with us now can feel free to partner with us and you will start to see the benefits of that down the road.”

He noted the transaction will also provide VMware with the balance sheet flexibility to pursue acquisitions to accelerate growth and make it eligible for broader stock indices.

Looking ahead, VMware president Sumit Dhawan said the company is focused on addressing three primary customer issues: enabling a new multi-cloud operating model, making it easier to developers to build and deploy new apps and meeting the needs of remote workers. Most of these solutions will be delivered as subscription and SaaS offerings, he said, offering the benefit of sustained growth.

Raghuram said its plan is in line with “explosive” macro trends which offer substantial runway. “We've got a strategy that's very unique" which includes delivery of "a ubiquitous software platform for the multi-cloud enterprise with a comprehensive portfolio that will be accelerating to be multi-cloud and SaaS and subscription oriented, and taken to market with the help of an ecosystem," he said.

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VMware’s Subscription and SaaS revenue came in at $776 million in its fiscal Q3, accounting for nearly a quarter of overall revenue. CFO Zane Rowe said during the event it expects the segment to rise to 33% of overall revenue in VMware’s fiscal 2022, with a “big increase” to follow in fiscal 2023.

By fiscal 2025, Rowe said “We would expect Sub & SaaS as a percent of total revenue to exceed 40% and continue to be a bigger and bigger chunk of our total revenue over the course of time.”

He added the company believes it will more than double Subscription and SaaS annual recurring revenue between its fiscal 2022 and 2025, with this figure forecast to grow from $3.6 billion in the former to more than $7.5 billion in the latter.