VMWare Sees 50 Percent Drop In Profits

Enterprise virtualisation market leader VMware, like just about everybody else in IT, is still feeling the pinch of a slow-recovering world economy, but it appears to be holding its own in the face of a nagging buying slowdown.

The hypervisor maker, majority owned by storage giant EMC, reported on 21 Oct. fiscal third-quarter revenues of $490 million (£296m) with a profit of $38 million, or 9 cents per share of common stock. This is compared with a profit of $83 million, or 21 cents a share, on $472 million in sales in the same period a year ago—an abrupt 54 percent year-over-year drop in earnings.

VMware beat some Wall Street forecasts in overall revenue but not in profit. Analysts surveyed by FactSet Research Systems, as reported by MarketWatch, had predicted VMware earnings of 20 cents per share on $473 million in revenue.

VMware shares improved slightly to $45.45 per share in after-hours trading on Oct. 21. Investors are obviously bullish on the company; a year ago, the stock was selling for $18.73.

Last quarter, VMware spent $362 million to acquire Java development tool maker SpringSource, which will help optimise development of enterprise data center middleware for cloud computing.

Company executives projected fourth-quarter revenue to jump substantially to between $540 million and $560 million. Analysts polled by Thomson Reuters, the Wall Street Journal reported, expect $523 million.

Looking further out, VMware said in its guidance that the first quarter 2010 would be “down sequentially,” but did not provide specifics.