BOSTON (Reuters) – Business software maker VMware Inc reported higher first-quarter profit on Tuesday as its revenue rose a stronger-than-expected 69 percent, sending its shares up 18 percent.
VMware also reiterated its forecast for 2008 revenue growth of about 50 percent, reassuring investors who had worried that increased competition from companies like Oracle Corp and Microsoft Corp would hurt growth, analysts said.
Chief Executive Diane Green told analysts on a conference call that she expected VMware to maintain the current rate of growth “well beyond 2008.”
Pacific Growth Equities analyst Kaushik Roy said that the strong results contrasted with negative investor sentiment in advance of the earnings release.
“There was a lot of chatter on the Street they would miss, but they were significantly above the Street consensus on total revenues,” he said.
VMware’s first-quarter revenue rose to $438.2 million from the year-earlier period’s $258.7 million, beating the average analyst forecast of $421 million, according to Reuters Estimates.
Net income in the quarter rose to $43 million from $41 million. Earnings per share fell to 11 cents from 12 cents a year earlier, when it had fewer shares outstanding.
VMware had quarterly profit excluding items of 22 cents, in line with the Wall Street estimate.
VMware’s software allow companies to run multiple “virtual” server computers on a single server. Its top-selling products allow one server to perform the work of 10 or more machines.
The company forecast that second-quarter revenue will rise 55 percent and also reiterated its forecast for 2008 revenue growth of about 50 percent.
VMware’s stock rose to $68.47 in extended trading, compared to its New York Stock Exchange close of $58.02. The company’s shares made their debut at $29 in August 2007 and reached a high of $125.25 in October.
VMware’s stock trades for about 38 times next year’s average per-share earnings forecast, according to Reuters Estimates. Microsoft and Oracle each trade for about 14 times the average forecast for next year’s earnings per share.
Customers save hundreds of dollars per year on every virtual machine that they create with the software. Those savings — on electricity, maintenance, labor, real estate and other costs — are on top of savings on physical servers that the software allows them to avoid buying.
EMC Corp, which owns a majority stake in VMware, rose to $16.30 from a New York Stock Exchange close of $15.59.
(Editing by Andre Grenon and Carol Bishopric)
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