VMware Q2 revenue up 54 percent, but slightly misses Street

VMware reported revenues that slightly missed analyst expectations for its 2008 second quarter, in which the company ousted its cofounder as CEO.

VMware reported revenue that slightly missed analyst expectations for its 2008 second quarter, a crucial period during which the virtualization leader ousted its cofounder from the CEO spot and lowered its revenue forecast for the year.

Revenue for its second quarter, which ended June 30, was US$456 million, an increase of 54 percent from the same period last year. However, consensus estimates from Thomson Financial analysts expected the company to fare slightly better, predicting US$458.6 million in revenue for the quarter.

Non-GAAP (generally accepted accounting principles) net income for the quarter was US$92 million, or US$0.23 per diluted share, which was in line with analyst estimates. GAAP operating income for the quarter was US$61 million, compared with US$47 million for the same period last year. VMware's cash exceeded US$1.5 billion, and deferred revenue was US$721 million as of June 30, the company reported.

In the U.S., revenue for the quarter was up 43 percent to US$240 million, and international revenue grew 68 percent to US$216 million. Service revenue -- which includes support, subscription and professional services -- jumped 85 percent to US$172 million, while revenue from software licenses was up 39 percent to US$240 million.

On July 8 VMware replaced cofounder and then-CEO Diane Greene with former Microsoft executive Paul Maritz. A company statement hinted that Greene did not leave of her own volition.

VMware at the time also said its year-over-year revenue growth would be "modestly below" a previous estimate of 50 percent. On Tuesday, VMware said it expects revenue for 2008 to grow 42 percent to 45 percent from last year, which means it could be as much as 7 percent less than the company's original forecast.

VMware faces some of its toughest competition yet from its new CEO's former company Microsoft, which released its Hyper-V virtualization software for its Windows Server 2008 OS last month. Citrix Systems' XenServer software also is putting the heat on VMware, a subsidiary of EMC that made its initial public offering not quite a year ago. Microsoft and other companies are aiming to commoditize virtualization, VMware's bread and butter, as part of the OS.

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Elizabeth Montalbano

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