UPDATE 2-VMware results smash estimates, shares soar

* Q4 EPS ex-items 31 cents vs Street view 26 cents

* Sales jump as pent-up software demand starts to show up

* Q1 rev forecast $580 mln-600 mln vs Street view $530 mln

* 2010 rev view $2.45 bln-2.55 bln vs Street View $2.28 bln

* Shares soar 18.6 percent in extended trading

(Adds forecasts, comments from analysts, byline)

By Jim Finkle

BOSTON, Jan 25 (BestGrowthStock) – Software maker VMware Inc
(VMW.N: ) posted quarterly results and forecasts above Wall
Street expectations on Monday, sending shares up 18.6 percent
on hopes that a slowdown in technology spending is ending.

VMWare said the improving economy boosted business software
sales, tapping pent-up demand from customers who wanted to
modernize data centers, but lacked the money to do so.

VMware said revenue could climb from 21 percent to 26
percent this year after growing just 8 percent in 2009.

“Wow. We had definitely seen IT spending bounce back
sometime in the fourth quarter, but this is well and beyond
what anybody was looking for,” said Pacific Crest Securities
Rob Owens. “This bodes well for earnings in general. I think we
are going to see a relatively robust earnings period.”

Palo Alto, California-based VMware’s net income fell to
$56.4 million, or 14 cents a share, from $111.5 million, or 29
cents, a year earlier, because of higher operating expenses.

VMware, which makes virtualization software that improves
computer efficiency, reported profit excluding items of 31
cents a share, beating the average analyst forecast of 26
cents, according to Thomson Reuters I/B/E/S.

Quarterly revenue rose 18 percent to $608 million, sharply
above the average analyst forecast of $554 million.

VMware, which is majority owned by EMC Corp (EMC.N: ),
forecast that first-quarter revenue would rise 23 percent to 28
percent from last year to between $580 million and $600
million, ahead of the $530 million average analyst forecast.

It said full-year revenue could rise to between $2.45
billion and $2.55 billion, above the $2.28 billion average
analyst forecast.

“They are guiding to approximately 25 percent growth going
into a new year. That’s incredible. It says a lot about their
visibility, their pipeline, the demand for their software,”
said Jefferies & Co analyst Katherine Egbert.

Other makers of business software also likely had strong
quarters, Egbert and Owens said.

Business software manufacturers that have not reported yetinclude Microsoft Corp (MSFT.O: ), Symantec Corp (SYMC.O: ), McAfee
Inc (MFE.N: ), CA Inc (CA.O: ) and Citrix Systems Inc (CTXS.O: )

The company’s shares rose to $49.80 in extended trading
after closing at $42.00 on the Nasdaq.

Investment Analysis

(Reporting by Jim Finkle, editing by Matthew Lewis)

UPDATE 2-VMware results smash estimates, shares soar