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VMware Reports Q3 Revenue Up 46%

TriCipher and Integrien acquisitions in the quarter expanded the company's offerings and bolstered its emerging cloud strategy.

VMware reported a strong third quarter based on an expanding product line and an emerging cloud strategy. With revenues up 46% and net income up 124%, this year’s third quarter was a reverse image of the flat or declining quarter posted a year ago.

“The quarter’s strong performance reinforces that VMware is on the right path to help customers navigate the changing IT landscape,” said Paul Maritz, CEO, in the announcement. "Virtualization is a central ingredient of cloud computing and central to the way many enterprises will reorganize their data centers. VMware will continue to try to position itself to help them do so," he added.

Some companies, such as Oracle, have grown revenues through the recession, primarily on the strength of acquisitions. VMware acquired two companies in the third quarter, Integrien for application performance analytics and TriCipher for federated enterprise identity management. Both were privately held and no revenues for either were listed in their acquisition. In January 2009, TriCipher received $12 million in venture funding. In the third quarter a year ago, VMware spent $356 million acquiring SpringSource.

Revenues for the third quarter 2010 were $714 million. The 46% increase contrasts with the 4% gain reported in the third quarter a year ago. Net income was $85 million, compared to $38 million a year ago, according to generally accepted accounting principles. Earnings were $.20 per share, compared to $.09 per share a year ago. Operating income increased to $94 million, compared to $23 million a year ago.

“VMware’s third quarter results were driven by strong demand across products and regions, led by the U.S. Federal sector,” said Mark Peek, chief financial officer, in the announcement. Revenues in the U.S. were up 47% to $362 million, compared to international revenues, which grew 44% to $352 million. A year ago, U.S. revenues had declined 1%, while international revenues grew 9%. Peek projected a fourth quarter 2010 of $790-$810 million in revenues, an increase of a more modest 30-33%.

New license revenues were $343 million, an increase of 43% from the third quarter a year ago. Services revenues, which include maintenance fees and consulting and training services, were $371 million, up 49% from the third quarter of 2009.

VMware just completed staging VMworld in San Francisco in early September and this week VMworld Europe in Copenhagen. The events drew 23,000 attendees. VMware used the events to show off an expanded product line, which includes vCloud Director for managing hybrid cloud workloads; VMware vShield, a set of products for cloud security; vCloud Data Center Services, for building a private cloud in the data center.

It has also seeded public cloud suppliers with its vCloud software, including Bluelock, Colt, SingTel, Terremark and Verizon Business. The vCloud software makes it possible for them to dispense cloud services for users of VMware’s ESX hypervisor and virtual machines.

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