VMware revenue lifted by maintenance fees

Services revenue and a recent update to vSphere anchored the virtualization software company's growth

Virtualization company VMware has reported a healthy increase in revenue for the fourth quarter, thanks largely to gains from software maintenance fees.

Revenue for the quarter, ended Dec. 31, came in at US$608.2 million, an 18 percent increase from the same period last year, VMware said Monday. It was also ahead of the consensus analyst estimate of $554 million for the quarter, according to Thomson Reuters.

New license sales declined slightly from last year, to $304.2 million, but services revenue jumped 52 percent to $303.9 million, thanks mostly to an increase in software maintenance revenue, VMware said. The maintenance revenue totalled $246.2 million, up from $160.5 million a year earlier.

Despite the climb in revenue, net income was down for the quarter at $56 million, or $0.14 per share, compared to $111 million, or $0.29 per share, in the same quarter a year earlier, the company said.

Excluding one-time items, net income on a pro forma basis was $127 million, or $0.31 per share, down from $142 million, or $0.36 per share, a year earlier. That was also ahead of the analyst estimate of $0.26 per share, Thomson Reuters said.

Paul Maritz, VMware president and CEO, attributed the boost in revenue to increased interest in virtualization in general, and upgrades to version 4 of VMware's vSphere software specifically.

Earlier this month, VMware set out to acquire open-source messaging software provider Zimbra from Yahoo, a deal VMware is in the process of closing. Also, VMware purchased enterprise Java vendor SpringSource last year.

For the full fiscal year, revenue was $2.0 billion, up 8 percent from 2008's $1.9 billion. The company expects annual 2010 revenue to be in the range of $2.45 billion to $2.55 billion, according to Mark Peek, chief financial officer for the EMC-owned company.

Following the earnings announcement, VMware's stock surged almost 18 percent in after-hours markets to $49.50 per share, in part because its forecast for fiscal 2010 came in higher than that of analysts. Thomson Reuters pegged the consensus analyst estimate at $2.18 billion to $2.37 billion in revenue for 2010.

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