VMware Results Better Than Predicted

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VMware reports its revenue increased 18 percent to $608 million in the fourth quarter, substantially above the average analyst forecast of $554 million

Virtualisation software maker VMware on 25 Jan. dazzled Wall Street with its quarterly results and cautiously predicted that its sales and licensing income growth could more than double in 2010 over the previous year—if the economy continues to improve.

Revenue for the company increased 18 percent to $608 million (£375m), substantially above the average analyst forecast of $554 million. The report, delivered an hour after the closing bell, increased share prices by 18.6 percent late in the day, from the closing price of $42 to $49.60 after hours on the NASDAQ listing.

VMware also reported profit of 31 cents per share, which beat the average analyst forecast of 26 cents.

It wasn’t a perfect report; the company’s net income fell to $56.4 million, or 14 cents per share, from $111.5 million, or 29 cents, a year earlier, thanks to higher operating expenses, VMware Chief Financial Officer Mark Peek said. The company added about 400 new employees in the quarter, Peek said.

However, Peek also said he believes VMware’s revenue could climb from 21 to 26 percent this year after growing just 8 percent in 2009.

The virtualisation trends of the past decade are continuing, VMware CEO Paul Maritz said, leaving the company with a “great opportunity.”

Maritz said the improving economy has boosted VMware’s—and other companies’—software sales, especially given overdue demand from customers that wanted to update their data centres but lacked the capital to buy new software and hardware in 2009.

“Virtualisation is not just a tactical ingredient to enable more efficient utilisation of hardware,” Maritz said. “It is in fact a strategic way in which to build the data center of the future and to build a bridge to the cloud.”

VMware, majority-owned by EMC, forecast that first-quarter revenue would rise 23 to 28 percent from 2009 to between $580 million and $600 million, distinctly above the $530 million average analyst forecast. It added that full-year revenue could rise to between $2.45 billion and $2.55 billion, above the $2.28 billion average analyst forecast.