VMware Q3 Earnings Top Estimate

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(RTTNews) - Virtualization software maker VMware, Inc. (VMW | Quote | Chart | News | PowerRating) said Wednesday after the markets closed that its third quarter profit fell 54% from last year, as higher operating expenses more than offset a 4% revenue growth. However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations as did its quarterly revenues. At the same time, the company forecast fourth quarter revenues above analysts' current consensus estimate.

The Palo Alto, California-based company reported GAAP net income for the third quarter of $38.2 million or $0.09 per share, compared to $83.3 million or $0.21 per share for the year-ago quarter.

Excluding items, non-GAAP net income for the third quarter was $95.1 million or $0.24 per share, compared to $93.1 million or $0.24 per share in the prior year quarter.

On average, 32 analysts polled by Thomson Reuters expect the company to earn $0.20 per share for the third quarter. Analysts' estimates typically exclude special items.

GAAP operating income for the quarter dropped 77% to $23 million, while non-GAAP operating income fell 5% to $109 million in the third quarter.

Revenues for the third quarter rose 4% to $489.75 million from $472.12 million in the same quarter last year. Thirty-one analysts had a consensus revenue estimate of $473.95 million for the third quarter.

License revenues for the quarter fell to $240.3 million from $285.1 million a year ago, while services revenues grew 33% to $249.5 million from $187.0 million last year.

For the third quarter, the company's U.S. revenues declined 1% year-over-year to $246 million, while international revenues increased 9% to $244 million.

"Our solid third quarter results were driven by strength in the US Federal sector, increased transaction volumes and particularly robust growth in our maintenance renewals," said Mark Peek, chief financial officer.

VMware makes virtualization software that allows a single host computer to create and run one or more virtual environments. The company last month announced the vCenter Family of Products, an expanded set of virtualization management solutions including significant new and enhanced offerings meant to dramatically reduce operational expenses.

For the first nine months, the company reported GAAP net income of $140.7 million or $0.35 per share, compared to $178.7 million or $0.45 per share for the same period last year.

Non-GAAP net income for the nine-month period was $274.4 million or $0.69 per share, compared to $273.9 million or $0.69 per share in the prior year period.

Revenues for the nine-month period increased to $1.42 billion from $1.37 billion in the corresponding year-ago period.

Looking forward, the company said it expects fourth quarter revenues in the range of $540 million to $560 million, with the first quarter revenue down sequentially. Analysts currently expect the company to post revenue of $523.00 million for the fourth quarter.

"While the economic environment remains challenging, we have improved visibility into our business and believe that the next two quarters will follow seasonal patterns," said CFO Peek.

VMware shares, which have traded in a range of $17.25 to $45.57 over the past year, closed Wednesday's regular trading session at $44.93, up 29 cents and gained an additional 57 cents or 1.27% in after hours trading.

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