VMware Loaded, Ready to Run

VMware is expected to receive a software-spending boost when it reports its third-quarter results.

Author:
James Rogers
Publish date:
Oct 21, 2009 12:39 PM EDT

VMware is expected to receive a software-spending boost when it reports its third-quarter results.

PALO ALTO, Calif. (

TheStreet

) --

VMware

(VMW) - Get Free Report

is expected to reap the benefits of an improving economy when it reports its third-quarter results after the market closes Wednesday.

The virtualization trailblazer's shares have almost doubled in value since the start of the year, and VMware has certainly been feeling the analyst love in recent weeks.

Jefferies & Company recently

upgraded

VMware on the strength of improved virtualization spending, and the analyst firm also raised the software maker's price target from $30 to $40.

"We believe improvement in virtualization spending in the second half of 2009 could boost top and bottom line for VMware," wrote Jefferies analyst Katherine Egbert, in a note. "While some customers still remain cautious, formerly delayed projects are now moving along and some strategic initiatives are being reignited."

Analysts surveyed by Thomson Reuters expect VMware to report sales of $473.95 million and earnings of 20 cents a share. The company, however, has been experiencing a slowdown in its phenomenal growth of recent years. In the third quarter of 2008, for example, VMware brought in revenue of $472 million, a 32% increase on the prior year, and earned 24 cents a share.

Wedbush Morgan analyst Kaushik Roy is nonetheless bullish on VMware's prospects and predicts a boost from

Intel's

(INTC) - Get Free Report

Nehalem processor and

Microsoft's

(MSFT) - Get Free Report

soon-to-be-launched

Windows 7

operating system.

"Intel's upcoming server processor

is expected to catalyze server sales," he wrote, in a recent note. "

And the Microsoft Windows 7 desktop software related refresh

is seen as a driver for IT managers to deploy desktop virtualization software."

Roy, who also pointed to good adoption of VMware's

vSphere

, raised the company's price target from $40 to $47.

Virtualization lets users divide physical hardware into multiple "virtual" chunks and has grown in popularity amongst users looking to juggle myriad of operating systems and applications. With companies also struggling with budget pressures, VMware and its rivals are pushing virtualization as a way for firms to reduce the amount of server and storage hardware within their data centers.

Oracle

(ORCL) - Get Free Report

, for example,

snapped up

virtualization specialist

Virtual Iron

earlier this year, and

Citrix

(CTXS) - Get Free Report

recently teamed up with Microsoft in an attempt to challenge VMware.

Not to be outdone, VMware has been busy forging its own partnerships, recently clinching a deal to sell its software

pre-installed