Shares of VMWare jumped 13.7 percent on Wednesday after the company issued stronger-than-expected first quarter earnings.
The software maker earned an adjusted 86 cents per share for its latest quarter, two cents above estimates, with revenue essentially in line at $1.59 billion.
The company's earnings beat was helped by strong sales of its newer virtualization software. VMWare also gave stronger current quarter guidance and announced a $1.2 billion share buyback.
The technology company had been struggling on multiple fronts, with disappointing results in the last two quarters and recent management departures. VMWare also undertook a restructuring that required job cuts.
VMWare is focusing on new products to offset its aging main business. In a conference call with analysts, chief financial officer Zane Rowe said "As we look to the rest of the year, our growth businesses are performing well,".
At least five analysts raised their price targets on the stock following the earnings announcement.
Analyst Brent Thill of UBS said in a note, "We feel that at current valuation levels, VMW shares offer a significant value opportunity for patient investors. Closure of the Dell-EMC deal, supporting evidence that VMW will continue to operate as an independent entity, stabilization of billings and license revenue and management's willingness to buyback shares will likely help reengage investors."
EMC, which owns more than 80 percent of VMWare, agreed to be acquired by Dell back in October in the biggest technology merger ever.
VMware shares have fallen about 30 percent since the Dell-EMC merger was announced, on worries that the tie-up will harm VMware's data center software business. VMware said on the conference call it expected to begin repurchasing shares after the EMC shareholder vote on the Dell merger.