Virtualization Vendor VMware Revenue Jumps 101% in 2006

VMware grew revenue 101% in 2006 to $709 million. VMware spokesmen attribute the growth primarily to its VMware Server and ESX Server virtual machine software as well as Infrastructure 3 suite of virtualization management software, which provides tools to manage VMware-based virtual machines.

VMware reported that 43% of its customer base has standardized on its product suite, which includes Virtual Center for remotely managing multiple virtual machines and VMotion, which moves running virtual machines from one physical server to another.

The emphasis on Infrastructure 3 has prompted a shift away from selling just virtual machine software into selling management software. Eighty percent of VMware's revenue now comes from the latter category, says Joe Tucci, EMC's chairman and CEO. Most VMware customers plan to virtualize 50% of their IT infrastructure within three years, he says. Virtualization in data centers is moving beyond server consolidation into additional phases, such as virtualized test and development machines, disaster recovery, and other forms of more efficient operations.

As the fastest-growing unit of EMC, VMware's strong fourth quarter yielded $232 million in revenue. Its growth helped fuel EMC total revenue of $3.2 billion for the quarter, a total that was $55 million more than EMC's forecast in October.

VMware was acquired by EMC in 2004 for $625 million and functions as an independent subsidiary with its own sales, marketing, and R&D. It has 2,500 employees.

VMware "gained market share across each of our four business units," noted CFO David Goulden. "We achieved solid top- and bottom-line growth," he said in a statement accompanying the earnings announcement.

Other units of EMC include the security division, which grew revenue 26% to $114 million in the fourth quarter. The unit was built around the RSA Security acquisition in September, which cost $2.1 billion.

EMC's content management and archiving business grew 43%, compared with the fourth quarter a year ago, to $203 million.

EMC's core information storage business grew 9% in the fourth quarter to $2.67 billion. Its revenue for 2006 totaled $11.2 billion, 15% higher than the $9.67 billion for 2005.