VMware results beat Street view, shares rise

BOSTON, USA: VMware Inc's quarterly results were slightly better than Wall Street expected as a new product showed promise, sending the shares of the business software maker up 7 per cent in a relief rally.

While GAAP net income for the second quarter was $33 million, or $0.08 per diluted share, compared to $52 million, or $0.13 per diluted share, for the second quarter of 2008, revenues for the second quarter were $456 million, flat from the second quarter of 2008.

The results marked a sharp contrast from the first quarter, when software sales fell for the first time in VMware's 11-year history and it warned that revenue would dramatically miss Street forecasts due to the weak economy and a sales slowdown associated with its first major product launch in three years.

VMware executives said on Wednesday that, while they are still having difficulty closing large deals, customers were going ahead with small projects. That allowed the software maker to meet lowered expectations.

"We executed around what we said we were going to do. People appreciated that," Chief Operating Officer Tod Nielsen said in an interview.

VMware forecast third-quarter revenues at $465 million to $480 million, compared with the average analyst forecast of $473 million according to Reuters Estimates.

It projected full-year revenue would rise 1 percent to 3 percent, which would be between $1.90 billion and $1.94 billion, compared with the average analyst forecast of $1.92 billion.

Nielsen said the company is more confident that it will meet its forecasts for the third quarter than it was about meeting the second-quarter projections.

He added that while the new product, vSphere 4, is getting a good early response from customers, it generally takes nine to 12 months for a major release to achieve widespread adoption.

"We are very encouraged by the early signs. Logic will say it will have an impact. But we're not saying what that will be," he said.

Palo Alto, California-based VMware posted second-quarter profit of 20 cents a share, excluding items, above the 19 cents average forecast, according to Reuters Estimates. Revenue was flat at $456 million, beating the average forecast of $453 million.

Chief Financial Officer Mark Peek said that, while he remains cautious about the economy, he is getting better visibility into the outlook for his business.

Net income fell 38 percent to $33 million, or 8 cents per share, from $52 million, or 13 cents a year earlier. Operating expenses rose as the company spent heavily on a major upgrade to its virtualization software.

VMware's programs let companies boost the efficiency of computer servers by running dozens of "virtual" machines on a single piece of hardware.

The shares in the company, which is majority owned by EMC Corp, rose 7 percent to $33.35 in extended trading. They rose 0.9 percent to $31.25 on the New York Stock Exchange before VMware released its results.