VMWare Beats Estimates

Software specialist VMware ( VMW) beat Wall Street's sales and profit estimates Tuesday, despite taking a second-quarter earnings hit.

The company's sales came in at $456 million, flat from the same period last year but comfortably beating analysts' estimate of $452.1 million. VMware also posted non-GAAP earnings of 20 cents a share on net income of $80 million, down from 23 cents a share and $92 million in the same period last year. Analysts surveyed by Thomson Financial had expected earnings of 19 cents a share.

On a GAAP basis, VMware earned 8 cents a share on net income of $33 million, down from 13 cents a share and $52 million in the year-ago quarter.

VMware also issued its third-quarter and fiscal 2009 guidance after the market close Wednesday. The Palo Alto, Calif.-based firm expects third-quarter sales between $465 million and $480 million, and fiscal 2009 revenue 1% to 3% higher than 2008. Analysts had predicted third-quarter sales of $471.1 million.

"Once again, we executed well, driving strong cash flows while continuing to invest in our long-term growth opportunities," said Mark Peek, the VMware CFO, in a statement. "Although we remain cautious about the global economic conditions, we are beginning to get somewhat better visibility into our business."

Virtualization has been one of the hottest technologies in recent years, and VMware has been its biggest champion.

The technology, which lets users divide physical hardware into multiple "virtual" chunks, has become more popular among users looking to juggle several operating systems and applications. Virtualization also is one way that budget-minded firms can reduce the amount of hardware within their data centers.

VMware, which competes with IBM ( IBM), Microsoft ( MSFT), Hewlett-Packard ( HPQ) and Oracle's ( ORCL) recent acquisition, Virtual Iron, is enjoying more growth overseas than in the U.S.

During the third quarter, the software specialist's U.S. revenue declined 3% year over year to $234 million. The firm's international revenue, however, rose 3% to $222 million over the same period.

Shares of VMware rose $2.75, or 8.8%, to $34 in extended trading.

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