VMW has beaten the analyst sales estimates for the first quarter and is up substantially in AH.
The company's press release can be found here:
biz.yahoo.com
VMware Sales Rise 69%, Topping Estimates; Shares Soar (Update2)
By Melita Marie Garza
April 22 (Bloomberg) -- VMware Inc., the maker of software that lets multiple operating systems run on the same computer, reported first-quarter sales that beat analysts' estimates as more companies used its products to cut costs and save energy.
VMware climbed 15 percent in late trading after posting a sales increase of 69 percent to $438.2 million, topping the $421.8 million average estimate of 22 analysts surveyed by Bloomberg. Net income rose 4.8 percent to $43.1 million, or 11 cents a share, from $41.1 million, or 12 cents, a year earlier, Palo Alto, California-based VMware said today in a statement.
VMware's virtualization software, which saves companies money on maintenance, hardware and electricity by letting one computer handle more tasks, remains in demand as the U.S. economy cools. The company stepped up spending on research and marketing last quarter to head off a threat from Microsoft Corp., which plans to release a similar product in August.
``They beat on the top line, showing that companies will still spend on technology that brings a high return on investment,' Jayson Noland, an analyst with Robert W. Baird & Co. in Milwaukee, said in a telephone interview. He has a neutral rating on the stock, which he doesn't own. ``As long as it is a mild downturn, VMware should fare pretty well.'
VMware rose $8.58 to $66.60 in extended trading after closing at $58.02 on the New York Stock Exchange. The shares have dropped 32 percent this year.
Company Forecast
The company said second-quarter sales would climb about 55 percent from a year earlier. That equates to about $460 million, compared with an average estimate of $461.8 million. VMware reiterated its annual sales forecast of 50 percent growth.
Virtualization software is the least likely item to be cut from corporate technology budgets after storage, according to Baird's survey of 100 major U.S. companies. U.S. economic growth slowed to 0.6 percent in the fourth quarter, down from 4.9 percent in the third, putting pressure on business spending.
The market for virtualization software may more than triple to $3.5 billion by 2011, according to Framingham, Massachusetts- based research firm IDC. VMware counts 84 percent of the 1,000 largest U.S. companies as customers.
VMware is majority-owned by Hopkinton, Massachusetts-based EMC Corp., the biggest seller of storage computers. VMware's initial public offering in August was the best-performing U.S. technology IPO last year.
Increased Spending
VMware's spending on research and development more than doubled last quarter to $119.3 million. Sales and marketing expenses rose 72 percent to $149.3 million.
The company aims to bolster its dominance in virtualization as Microsoft and providers of open-source programs enter the market. Open-source software is built around freely distributed code. Providers of such software make money by selling support services and premium versions of the programs.
VMware has ``first-mover advantage and they are moving aggressively to capitalize on that, adding new products and hiring more engineers,' Noland said. The increased spending is ``going to give some investors reason to pause. With the threat of Microsoft and free products, it's the right thing to do.'
(VMware executives started a conference call at 5 p.m. New York time. To listen, see ir.vmware.com.)
To contact the reporter on this story: Melita Marie Garza in New York at mgarza4@bloomberg.net
Last Updated: April 22, 2008 17:21 EDT
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