VMware reports strong Q4, but less rosy outlook

VMware reports strong Q4, but less rosy outlook

VMware reported solid results for its fourth quarter, but the sales forecast it gave for the current quarter is less than analysts had expected.

Virtualization vendor VMware reported solid results for its fourth quarter, a sign that businesses were prepared to keep spending on technologies that can give them a fairly quick return on investment.

VMware's revenue was US$515 million, up 25 percent from a year earlier and slightly ahead of what financial analysts had been expecting, according to Thomson Reuters.

Net income before one-time charges was US$142 million, or $0.36 per diluted share, up from $103 million and $0.26 per share in the fourth quarter of 2007. Analysts had been expecting earnings for the quarter just ended of $0.26 per share.

"We have been executing well in a difficult economy," Paul Maritz, VMware's president and CEO, said in a statement Monday.

The future looked less certain, however. VMware said it expects sales from the March quarter to be about US$475 million, less than the $497 million analysts have been forecasting. And like many other vendors, VMware isn't providing a revenue estimate for 2009, citing the uncertain economy.

VMware leads the market for server virtualization software, which can help companies save money by allowing them to consolidate several workloads onto one physical server, reducing hardware and energy costs. It faces emerging competition from Microsoft, Oracle and others.

The company's sales growth has been slowing for several quarters as it exits a rapid early-growth period. Revenue in the fourth quarter last year grew 80 percent from the year before, for example, compared to last quarter's 25 percent growth.

VMware is looking to new markets to sustain momentum. Last September it announced plans to build a "virtual datacenter operating system," including software for virtualizing not only servers, but also network and storage gear. It is also developing products to let companies link their data centers to those of cloud computing service providers.

VMware hasn't given release dates for any of those new products, however, saying only that they will appear in 2009. It's expected to give customers an update at its VMworld conference in Cannes next month.

VMware hasn't announced any big layoffs yet, but it did begin a hiring freeze in the second half of last year to help keep costs down. It has also said it will divide itself into distinct product divisions, with a separate managing executive and research and development group for each division.

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