VMware Feels Economy's Pinch

SAN FRANCISCO -- VMware(VMW Quote) executives pinned its reduced fortunes squarely on the weak economy Tuesday.

The company's second-quarter revenue suffered from slower-than-expected growth, and VMware projected full-year revenue growth of 42% to 45%, down from more heady levels of 69% in the first quarter and nearly 90% in late 2007.

"This is a company with good fundamentals, coming down from hyper-growth to strong growth," newly named CEO Paul Maritz said in an interview. "We're living through the maturation process."

The company's full-year revenue growth projections imply a range of $1.88 billion to $1.92 billion. Analysts were expecting $1.96 billion.

The virtualization software developer said Tuesday that second-quarter revenue grew 53.7% to $456.1 million, from $296.8 million in the year-ago period. Analysts were looking for $458.6 million, according to Thomson Reuters.

Net income rose 53% at the Palo Alto, Calif. company to $52.3 million, or 13 cents a share, from $34.2 million, or 10 cents a share, in the year-ago period.

Excluding special items, EPS was 23 cents, in line with analysts' expectations.

For the third quarter, revenue is expected to range from $462 million to $468 million. Analysts were projecting revenue of $497.3 million.

The stock was down $5.58, or 14.7%, to $32.39 in extended trading.

The company lowered full-year revenue expectations in recent weeks. The culprits, according to the company, are a combination of the economic downturn in the U.S. and VMware's 2007 shift to selling enterprise license agreements, which are more difficult to close in a troubled economy.