In the aftermath of the dot-com bust, the virtualization software maker VMware emerged as that rare creature able to make more money while customers spent less on technology. Its products let businesses run numerous applications on each physical server –- which can lead to lower hardware and energy costs. That type of equation inspires even the most constrained chief information officers.
Well, here we are in the midst of another burst bubble, and everyone wants to know if VMware can pull off the same trick twice.
On Tuesday, VMware, based in Palo Alto, Calif., reported a 32 percent rise in third-quarter revenue to $472 million. That figure beat out analysts’ estimates of $463 million in revenue. In addition, VMware’s earnings of $83 million, or 24 cents a share, surpassed analysts’ projections by 4 cents.
Investors pushed shares of VMware higher by close to 25 percent in after-hours trading to $23.34 a share. During regular trading, VMware closed at $18.73 a share – waaaaaay off a 52-week high of $125.25 a share.
While bullish about its play in a down market, VMware conceded that economic jitters have it concerned. The company is looking for full-year revenue growth between 42 percent and 45 percent, although there’s “an increased likelihood” of hitting the low end of that range due to the economy, VMware said in a statement.
Longtime VMware watchers are still struggling to deal with the idea that the company is no longer doubling revenue every year. This is one reason why VMware’s shares have plummeted. Forty percent growth is just not good enough when you’ve tasted something so much sweeter.
In addition, VMware faces growing competition from Microsoft, Citrix Systems, Oracle and Sun Microsystems.
But even when you take all of this into account, VMware’s continued growth in a battered economy and relatively unchanged take on the market seems to back up the idea that virtualization code will appeal to buyers with limited budgets.
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