VMware and Cloud Computing's Growth: Look Beyond the U.S.

In today's world, most companies span several regions and sell across the world. As Foolish colleague Morgan Housel notes, 10 years ago, less than a third of S&P 500 revenue came from overseas. Today, more than half of the S&P 500's growth comes from overseas.

And that number is growing. The truth is, investors regularly underestimate how much demand comes from abroad. More importantly, for large, multinational corporations that have already established a presence in their home markets, much of their future growth comes from abroad.

With that in mind, today we're looking at virtualization market leader VMware (NYSE: VMW  ) . We'll examine not only where its sales and earnings come from, but how its sales abroad have changed over time.

Where VMware's sales were five years ago
Five years ago, VMware generated 54% of its sales from the United States.

Source: Capital IQ, a division of Standard & Poor's.

Where VMware's sales are today
Today, VMware's sales aren't a whole lot different from where they were before. Like peer companies within the U.S., sales increasingly come from overseas, but U.S. sales still hold a slim majority of VMware's total.

Source: Capital IQ, a division of Standard & Poor's.

The good news? VMware's sales across all geographies continue to soar.

Segment

5-Year Total Sales Growth

United States 593%
International 691%

Source: Capital IQ, a division of Standard & Poor's.

As opposed to consumer-facing software that's easier to copy, VMware's virtualization software is used by larger companies that also rely on VMware for crucial support services. While other software segments have to worry about piracy cutting into growth rates, that's less of a concern for VMware's model, and the company should see continued gains as it expands further into international markets.

Competitor checkup
One last point to check is how VMware's footprint compares to some of its peers across the broader virtualization and broader software industry:

Company

Geographic Area With Most Sales

Percent of Sales

VMware United States 51%
Microsoft (Nasdaq: MSFT  ) United States 58%
Citrix (Nasdaq: CTXS  ) Americas 55%
Red Hat (NYSE: RHT  ) Americas 64%

Source: Capital IQ, a division of Standard & Poor's.

As you can see from the table above, VMware is diversified when it comes to the virtualization industry. However, the broader, more important point is that the virtualization business model is built heavily around support costs that appeal to IT firms across the world. As companies increasingly turn to advanced virtualization methods to make their IT infrastructure more efficient, all of the companies above should continue seeing increased sales to their virtualization divisions. This is one industry that still has quite a bit of growth left in it.

Keep searching
If you're looking to stay updated on VMware, or any other companies listed above, make sure to add them to our free watchlist service, My Watchlist. It's free, and it helps you stay updated on news and analysis on your favorite companies.

Eric Bleeker owns no shares of any companies listed above. The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and VMware. Motley Fool newsletter services have recommended creating a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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