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VMware Reports Q4 Revenues, Earnings Up 25%

Revenues up 25% to $515 million in the fourth quarter, better than Wall Street was expecting

Virtualization market leader VMware, which is fighting a two-front war against the recession and Microsoft, made 36 cents a share on revenues up 25% to $515 million in the fourth quarter, better than Wall Street thought it would. Estimates only had it pulling down 26 cents (non-GAPP) on revenues of $510 million.

However the company pulled in its horns in projecting its likely results this quarter and said that it thought it would only do about $475 million. Analysts were looking for promises of $495 million.

VMware has never been down sequentially before.

And you can forget any guidance for the year. “The uncertainty in global economic conditions” is such, it said, that it’s “particularly difficult to predict product demand.”

CEO Paul Maritz (pictured below) said the company was being “conservative.”

He said that customers were “indecisive” and preserving cash. He’s expecting spending to be weighed toward the second half. Given that 1Q08 is a hard compare, VMware figures enterprise licenses could be down this quarter by 10%.

On a brighter note, perhaps, 2009 budgets have not been locked down.

Maritz claimed the company had surrendered no major losses to Microsoft and expects to up the ante with a swat of new products and upgrades this year to extend its technical lead. VMware is also doing R&D to include non-x86 platforms such as smaller devices in its embrace.

The company saw revenues up 42% in the whole of last year to $1.9 billion, half what it had hoped for before the bottom fell out of the economy and Microsoft and other wannabes like Citrix started eating into its franchise but meeting the low end of the guidance given in early November. It earned $416 million or $1.05 a share (non-GAAP) which worked out to $290 million, or 73 cents a share, all things considered, compared to $218 million, or 61 cents a share, in 2007.

Its annual operating margin worked out to 17% (GAPP).

The company, which says it’s “executing well in a difficult economy,” figures its well positioned and prepared. It says it’s “executing on our product roadmap, strengthening our ecosystem of partners and bolstering our management team – both globally and operationally.” Apparently 40% of its people have been there less than a year; that of course would include acquisitions.

During the year US revenues grew 37% to $988 million and international revenues grew 48% to $893 million. License revenues were up 30% to $1.2 billion and services revenues up 67% to $703 million.

VMware’s got $1.8 billion in the bank and had $870 million in deferred revenue on the books as of December 31.

China bookings were reportedly strong in the quarter. Maritz said 50% of enterprise agreements had a desktop component like the contract it won against Microsoft from the US Army.

He said VMware is only seeing Microsoft in “hypothetical cases – slideware comparisons in large accounts where Microsoft has a sales presence.” He knows however that they will eventually come to blows. That’s why he’s trying to keep a step ahead of Redmond in technology.

VMware has trimmed expenses to meet reality and has frozen salaries. It’s being highly selective with hiring.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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