Research firm Raymond James has maintained “Marketperform” rating on VMware, Inc. (NYSE:VMW) shares as the company prepares to posts its second quarter earnings today. Checks performed of US enterprise were mixed, but commercial/small size business performed better.

For the second quarter, the performance will be as expected but for the second half guidance is expected to be aggressive fueled by 3Q license ramp and dependence on 2H enterprise license agreement (ELA) renewals to drive new license sale.VMware logo

Growth of VMware depends on how much it can do away with its declining server virtualization gains and adapt private cloud management and afterwards on hybrid public cloud and software-defined networking (Nicira).

Analysts upbeat on VMware performance

Analysts are upbeat as some big customers and cloud service providers are installing VMware cloud tools reflecting bottom up VMware private cloud demand. The report adds that there are some customers who are not clear on their decision and are opting competitors to cut cost and deploy just one set of software.

According to the report, resellers in the United States indicated a mixed second quarter for the company. Sales of vSphere continue to slow, and management tools are strong enough but can compensate only in part. For full fiscal, VMware is expecting to enhance its business in the second half of the year when less than two thirds of 2013 ELA renewals are due.

Raymond James analyst believe that private customers were willing to have VMware, Inc. (NYSE:VMW) but were also looking for alternatives such as Microsoft Corporation (NASDAQ:MSFT), OpenStack and some at Citrix Cloudstack. Customers want to pull down the cost in their cloud implementation. Microsoft has stacked up the competition with Hyper-V 3, Windows Server 2012, and Virtual Machine Manager. Competitors of VMware are also coming up with lighter-weight orchestration tools.

VMware’s Estimates from Raymond James

For 2013, VMware, Inc. (NYSE:VMW) license is expected to grow in the range of 6-9 percent y/y. For the second quarter, consensus is seasonal at 7 percent q/q, and for the third quarter it will increase 4 percent q/q, compared to 5 percent drop in the past two years in order to set up a still seasonally strong 24 percent q/q in 4Q to make the full year guidance.

For the second quarter, Raymond James analyst are expecting revenue of $1.235 billion (+10 percent y/y), compared to an average estimate of $ $1.232 billion, at the higher end of guidance of $1.210-1.240 billion. License revenue is expected to come in at $525 million (+2 percent y/y) in-line with consensus $524 million (+1 percent) and guidance of $515-535 million (0-3 percent).