VMware's Three Data Points For 2016 From CFO Jon Chadwick

• VMware, Inc. VMW shares lost 20 percent in the past year, and are trading meaningfully below their 52-week high of $99.71.
• Macquarie's Rajesh Ghai maintained an Outperform rating for the company, with a price target of $100.
• The outright rejection of the downstream merger theory by VMW CEO is likely to impact the near-term trajectory of the stock, Ghai said.

At the company’s Analyst Day, VMware CEO reiterated that the EMC federation model was the best structure for parent EMC Corporation EMC.

The company also announced the launch of several new product releases besides a number of product refreshes. “This includes significant enhancements to the company’s hybrid cloud offering which in our view helps reduce the friction for VMW enterprise customers considering using vCloud Air as an extension of their on-premise datacenter,” analyst Rajesh Ghai wrote.

The company demonstrated its ability to move virtual machines across different clouds and bringing them back to the on-premise datacenter. Other product refreshes included new releases of SDN solution NSX, virtual storage VSAN and automation suite vRealize.

VMware CFO Jonathan Chadwick announced that the company’s operating margins for 2016 are expected to expand 50bp year-over-year, while the FCF for the year will have a 12 percent tailwind over 2015.

The company also mentioned that revenues from hybrid cloud, Airwatch and other SaaS recurring revenue contribute 9 percent of its total revenues in 4QFY16.

“We note the improving predictability of the model as subscription revenue ramps and VMW given its strategic positioning in the data center maintains a high support attach and renewal rate in its installed base,” Ghai commented.