VMware's growth slows, but still solid

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Virtualisation has been big news over the past year, but increasing competition from new entrants to the market has hit the growth of leader VMware and sent its stocks down as much as 26 per cent.

The firm reported solid fourth quarter revenue, just missing expectations. VMware's revenue for the fourth quarter climbed 80 per cent from the same quarter a year ago, up to $412 million (£207 million). Revenue for 2007 hit $1.33 billion, a jump of 88 per cent from 2006.

"VMware executed at a remarkable pace in 2007 as customer interest and partner attention increased several fold," said Diane Greene, president and chief executive of VMware.

But the growth was slower than in previous quarters - where it's topped 100 per cent - and increasing competition in the market lead the firm to announce 2008 expectations short of what analysts predicted. Mark Peek, VMware's chief financial officer, told analysts that the firm expects revenue of $1.99 billion in 2008, short of some analyst's expectations and short of the 100 per cent growth it's seen in previous years.

VMware spun off from EMC in August last year. In the first quarter following the IPO, revenue jumped 90 per cent.

Still, Greene was optimistic: "We begin 2008 with more than 100,000 customers, 500 technology and consulting partners, nearly 10,000 go-to-market partners, and more than 5,000 employees. As others begin to enter the market, VMware and our partners are continuing to broaden and deepen our highly reliable end-to-end virtualisation solutions."

She added that VMware's product pipeline for 2008 "promises to deliver much more".

In the fourth quarter, GAAP operating income was at $76 million, up from $37 million in the fourth quarter of 2006. Net income was $78 million, up from $31 million in the year-ago quarter.

For the full year, GAAP operating income was $235 million, up from $121 million in 2006. Net income was $218 million, up from $86 million in 2006.

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