Apps & Software
VMware's Revenue Punt Destroys Its Shares & EMC Shares (VMW, EMC)
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VMware, Inc. (NYSE: VMW) has posted earnings of $0.26 non-GAAP EPS on $412 million in revenues. First Call had estimates pegged at $0.24 EPS and $417.37 in revenues. Even though this represents an 80% revenue gain, this is going to be dismal for most VMware investors.
If the company offers guidance in the conference call, Next quarter’s estimates are $0.24 EPS and $436.41M in revenues; if the company offers 2008 targets, those estimates are $1.17 EPS and $2.08B in revenues. This was only the second earnings report out of the company and its first full quarter as a public company. Analysts had an average price target on VMware of $105.88, and we’d likely expect many analysts to have more cautious comments that this looks "near full value" based upon today’s numbers. Its former parent, EMC Corp. (NYSE: EMC) is set to report its earnings tomorrow.
Diane Greene, president and chief executive officer of VMware: "We begin 2008 with more than 100,000 customers, 500 technology and consulting partners, nearly 10,000 go-to-market partners, and more than 5,000 employees. As others begin to enter the market, VMware and our partners are continuing to broaden and deepen our highly reliable end-to-end virtualization solutions."
VMware stock closed down 1.2% to $79.55 in normal trading and its shares had mostly traded in a $76 to $83 trading range over the last five trading sessions. This is the worst event-risk trading seen on this with a drop of 25% to $62.37 in after-hours trading. In fact, this essentially wipes out most of the post-IPO gains. VMware will need to show some huge guidance to make this initial reaction a bit less violent.
You can imagine the headlines for Tuesday: "VIRTUALIZATION CRAZE ENDSAS FAST AS IT STARTED"….. That might prove true for VMware, althoughthis trend will be a huge savings boon for every large and mediumenterprise out there.
EMC shares are down some 9% or more to $15.30 in after-hours trading after a mere 1% gain in regular trading today.
Jon C. Ogg
January 28, 2008
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