VMware Reports 46% Q3 Revenue Increase, but Stock Buyers Unimpressed

By Chris Preimesberger  |  Posted 2010-10-18 Print this article Print

VMware's revenue for the third quarter was $714 million (20 cents per share), up 46 percent from a year ago. Despite beating Wall Street estimates, the stock price fell 6.6 percent.

VMware reported another highly profitable financial quarter after the New York Stock Exchange bell Oct. 18, and even though its results exceeded Wall Street expectations, its stock price took a sharp 6.6 percent hit in after-hours trading.

VMware was selling for just under $73 at 5:30 p.m. EDT Oct. 18, down from $78.35 at the 4 p.m. closing.

The Palo Alto, Calif.-based virtualization software company reported net income of $85 million, or 20 cents a share. On a non-GAAP basis, VMware reported earnings of $165 million, or 39 cents a share. Revenue for the third quarter was $714 million, up a solid 46 percent from a year ago.

Wall Street analysts had been expecting VMware to show earnings of 35 cents a share on revenue of $698 million.

There is no question that demand for virtualization software, both in the data center and on the desktop, continues to ramp up. The latest market numbers indicate that VMware has its software present in just under 90 percent of midrange and large enterprise data centers.

"VMware's third-quarter results were driven by strong demand across products and regions, led by the U.S. federal sector," Mark Peek, VMware's chief financial officer, said on the conference call for analysts, stockholders and journalists. "For the fourth quarter, we expect total revenues to be within a range of $790 and $810 million [from $714 million in Q3], an increase of 30 percent to 33 percent from 2009."

The quarter's performance reinforces VMware's contention that it is on the right path to help customers navigate the changing IT landscape, CEO and President Paul Maritz said.

"With virtualization as a central technology in cloud computing, VMware will continue to invest to deliver a broadening set of IT-as-a-service solutions across infrastructure, application platforms and end-user computing," Maritz said.

The company also raised its outlook for the fourth quarter. VMware changed its guidance in the last quarterly report on July 20, saying that in the third quarter it expects total revenues to be between $680 million and $705 million. For the full year, it raised its revenue outlook to between $2.73 billion and $2.8 billion.

Earlier the company had predicted annual revenue between $2.63 billion and $2.73 billion.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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