VMware reports solid third quarter

VMware's Q3 results were better than analysts expected, with US$472 million in revenue.

VMware reported better than expected financial results on Tuesday and said it was standing by its forecast for the rest of the year, albeit at the lower end of its guidance.

Revenue for the third quarter, which ended Sept. 30, was US$472 million, up 32 percent from the same period a year ago. That's slower growth than VMware has reported in the past, but still ahead of the $463 million that financial analysts had been expecting, according to a poll by Thomson Reuters.

Net income was $83 million, or $0.21 per share, up from $65 million, or $0.18 per share, in the third quarter last year. That too was ahead of the analyst forecast, which called for earnings of $0.20 per share.

VMware CEO Paul Maritz called the figures "solid" in the face of a "challenging economic environment." The results are evidence that customers are willing to spend money on technologies that can help them reduce costs, he said in a statement.

VMware makes virtualization software that's used by companies to consolidate industry-standard servers onto a smaller number of machines. It more or less created the market and became its technology leader, but it now faces new competition from Microsoft, Oracle and others.

VMware maintained its forecast for 2008 revenue growth of 42 percent to 45 percent, but it cautioned that the economic uncertainty makes it difficult to predict demand for its products. It said there was "an increased likelihood that 2008 revenue will be at the lower end of the guidance range."

The growth estimate is ahead of the analyst forecast, but it continues a trend toward slower growth for VMware as its software becomes more widely used. Its revenue increased 54 percent in the second quarter and 69 percent the quarter before that.

Shares in VMware leapt by as much as 24 percent after the results were reported, trading at $23.30 at the time of this report. They ended the normal day's trading at $18.73, which was 9 percent down from Monday's close.

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