Bloomberg News

VMware Forecast Tops Estimates as Firms Outfit Data Centers

July 19, 2011

(Updates with analyst’s comments in third paragraph.)

July 19 (Bloomberg) -- VMware Inc., the biggest maker of programs that let computers run multiple operating systems, forecast sales that topped analysts’ estimates as customers spent more on products that help data centers run more cheaply.

Revenue in the current period will be $915 million to $940 million, Palo Alto, California-based VMware said today in a statement. That topped $898.2 million, the average estimate of analysts surveyed by Bloomberg. Profit and sales for the second quarter also exceeded projections, while the company increased its full-year revenue forecast. Shares jumped in late trading.

VMware is benefitting as companies upgrade data centers, the warehouses that help them deliver computing over the Internet, via the so-called cloud. VMware started offering multiyear deals to large companies a little more than three years ago and many of those are now up for renewal, said Rajesh Ghai, an analyst at ThinkEquity LLC in San Francisco.

“These guys are renewing a lot of enterprise license agreements that they had signed in 2008,” said Ghai, who recommends buying VMware shares. “But this isn’t just that, this is clearly a lot of new customers coming on board and buying their software.”

VMware, majority-owned by EMC Corp., leaped to as high as $113.50 in late trading after earlier rising $5.24 to $106.02 at 4 p.m. in New York Stock Exchange composite trading. The stock has risen 19 percent this year.

Higher Full-Year Forecast

Full-year revenue will be $3.65 billion to $3.75 billion above a previous forecast for sales of as much as $3.65 billion. Analysts had expected sales of $3.62 billion.

Profit excluding certain costs was 55 cents a share last quarter, exceeding the 47-cent average of projections compiled by Bloomberg. Sales rose 37 percent to $921.2 million. Analysts on average estimated $873 million.

License revenue, a predictor of sales, was $465 million. Analysts on average had expected about $440 million, Ghai said.

--Editor: Tom Giles.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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