UPDATE 3-VMware outlook beats estimates, shares climb

* 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 rise 18 percent in extended trading
(Adds analyst, company comments. Updates shares)

By Jim Finkle

BOSTON, Jan 25 (BestGrowthStock) – Software maker VMware Inc
(VMW.N: ) forecast 2010 revenue growth to be far above Wall
Street expectations, saying customers were becoming more
comfortable about investing in new technologies after a budget
crunch last year.

Shares of VMware, which makes software that boosts the
efficiency of business computers, jumped 18 percent after the
company also reported fourth-quarter results that were well
ahead of analysts’ forecasts.

VMware projected that revenue could climb between 21
percent and 26 percent this year, after growing just 8 percent
in 2009. The software maker, majority-owned by EMC Corp
(EMC.N: ), saw revenue at $2.45 billion to $2.55 billion, above
the $2.28 billion average analyst estimate, according to
Thomson Reuters I/B/E/S.

“In January 2009 we would be talking to CIOs and they would
say, ‘I don’t even have a budget yet,'” VMware Chief Operating
Officer Tod Nielsen said in an interview. “Now it’s a much more
normal course. People are saying ‘Here’s my budget. I want to
do this.”

Business conditions reached an inflection point during the
fourth quarter of 2009 as improvement in the economy provided a
stronger boost to VMware’s earnings than analysts had
anticipated.

VMware also said it benefited from a sales promotion that
ended Dec. 15, and as customers spent money left in their
budgets at the end of the calendar year.

Fourth-quarter profit (Read more your timing to make a profit.), excluding items, was 31 cents a
share, beating the average analyst forecast of 26 cents.
Revenue rose 18 percent to $608 million, sharply above the
average analyst forecast of $554 million.

“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.”

THE OUTLOOK

VMware was one of the fastest-growing technology companies
prior to the recession, with revenues doubling each year. That
slowed to almost zero growth during the recession, leaving
analysts unsure what pace would be normal for the company in a
recovery.

The company projected first-quarter revenue to rise 23
percent to 28 percent from last year to between $580 million
and $600 million, ahead of the $530 million 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 yet
include Microsoft Corp (MSFT.O: ), Symantec Corp (SYMC.O: ), McAfee
Inc (MFE.N: ), CA Inc (CA.O: ) and Citrix Systems Inc (CTXS.O: ).

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.

The company’s shares rose to $49.51 in extended trading
after closing at $42 on the New York Stock Exchange. EMC shares
rose 4.3 percent to $17.67 after hours, from their close of
$16.94.

Stock Market Basics

(Reporting by Jim Finkle, editing by Matthew Lewis and Carol
Bishopric)

UPDATE 3-VMware outlook beats estimates, shares climb