VMware, A $1 Billion-A-Year Company, Slips Below 2008 Expectations - InformationWeek
Software // Enterprise Applications
07:20 PM
Connect Directly

VMware, A $1 Billion-A-Year Company, Slips Below 2008 Expectations

The company's shares have more than quadrupled in value since the IPO, but the stock has dropped since November.

VMware on Monday said its revenue grew 80% over the year-earlier fourth quarter to $412 million, pushing VMware revenue above $1 billion in 2007 for the first time. Total revenue for the year came to $1.33 billion, an increase of 88% over 2006.

But the results fell short of Wall Street expectations, and led to a forecast of virtualization software revenue slowing down in 2008. VMware predicted it would increase revenue at a rate of 50% per quarter instead of 88%, a mark a little below Wall Street targets, according to financial reporting service Reuters.

"VMware executed at a remarkable pace in 2007. ... We begin 2008 with more than 100,000 customers, 500 technology and consulting partners," president and CEO Diane Greene said. "VMware's vision for the virtual data center is delivering tremendous value, ... and our product pipeline for 2008 promises to deliver much more."

VMware's stock was down 26% in trading for the day, closing at $83 per share. Parent company EMC's shares were down 11%, according to Reuters.

About 13% of the company was sold in an August IPO sponsored by EMC. The IPO started with a stock price of $29, which rose to $51 by the end of the first day, yielding $1 billion in capital for the company. VMware shares have more than quadrupled in value since the IPO, but the stock has dropped since November.

"If you miss your numbers in just your second quarter after going public, that suggests the stock was overhyped," Trip Chowdhry, an analyst at Global Equities Research, told Reuters.

"The story is not as perfect as investors believe. Oracle and Microsoft and Citrix have spoiled VMware's party. Not only that, VMware execution has been flawed. Instead of being a category, it will be relegated to being a product," Chowdhry said.

VMware said net profit in the fourth quarter was $78 million, or 19 cents per share, compared with $31 million, or 9 cents per share, a year earlier.

VMware's growth is now fueled by acquisition as well as new customers. In September it acquired Dunes Technologies, a virtual machine management software supplier, and this month it bought Thinstall, an application virtualizing software supplier.

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
[Interop ITX 2017] State Of DevOps Report
[Interop ITX 2017] State Of DevOps Report
The DevOps movement brings application development and infrastructure operations together to increase efficiency and deploy applications more quickly. But embracing DevOps means making significant cultural, organizational, and technological changes. This research report will examine how and why IT organizations are adopting DevOps methodologies, the effects on their staff and processes, and the tools they are utilizing for the best results.
Register for InformationWeek Newsletters
White Papers
Current Issue
2017 State of IT Report
In today's technology-driven world, "innovation" has become a basic expectation. IT leaders are tasked with making technical magic, improving customer experience, and boosting the bottom line -- yet often without any increase to the IT budget. How are organizations striking the balance between new initiatives and cost control? Download our report to learn about the biggest challenges and how savvy IT executives are overcoming them.
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Flash Poll