VMware Reports Flat Revenue, Decreased Profits, But Rosy Outlook

Server virtualization market leader VMware on Wednesday reported flat revenue and a drop in profits in its second quarter.

However, the company, which still dominates the market for server virtualization software, said it expects revenue for the entire year to rise 1 percent to 3 percent.

VMware reported revenue of $455.7 million during its second quarter, which ended June 30. This was essentially flat when compared to the $456.1 million it reported during the same quarter of 2008.

The company recorded a profit of $33 million, or 8 cents per share, in the second quarter, down from its profit of $52 million, or 13 cents per share, for the same period last year.

Licensing revenue of $222 million for the quarter fell 20 percent compared to last year, compared to a 32 percent increase in services revenue to $234 million, VMware said. The drop in licensing revenue was attributed to the challenging macroeconomic environment, VMware said.

However, the company's launch of its new VMware vSphere 4, the follow-on product to its ESX 3, earlier this year has gone well, and is laying the foundation for future growth, said Paul Maritz, VMware president and CEO, in a statement.

"VSphere is not only the largest and most ambitious product step we have taken so far, but the release also reflected improvements in most operational aspects of our business. We now look forward to releasing complementary management and desktop virtualization products over the remainder of the year," Maritz said.

VMware expects third-quarter revenue to be between $465 million and $480 million, compared to actual revenue of $472 million it reported in the third quarter of 2008, said Mark Peek, VMware's CFO, in a statement. Peek also said the company expects total revenue for all of 2009 to grow between 1 percent and 3 percent compared to 2008.

Wall Street seemed please with VMware's report, which was released after the close of the market. Nearly three-and-a-half hours after market close, VMware's share price in after-hours trading was $33.50 per share, up from its close of $31.25.

Revenue in the U.S. dropped 3 percent compared to last year, VMware said.

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