VMware Cloud Computing Casts a Shadow on Growth Prospects

VMware, Inc. (NYSE:VMW) disappointed investors with its earnings report last night and shares fell 20% today.  While the EPS figures actually came in above expectations at $0.25 for the first quarter, management pointed to clouds on the horizon that will likely lead to a lower share price in coming weeks and months.

From ZachStocks.com -- The company certainly has a strong product line as they offer revolutionary technology alternatives which help companies save costs related to their computing needs.  Specifically, VMW is known for its cloud computing solutions.  While I’m certainly no technology guru, I can definitely understand the appeal of a solution that allows businesses to run multiple operating systems on one server, or link a server farm together to harness the full power of the equipment instead of segregating each server to a particular task.

For the quarter, VMW realized revenue of $470 million which is only 7% above the revenue from the first quarter 2008.  Management noted that the macro environment was extremely challenging and stated that revenue for the second quarter would likely be flat to down compared to last year.  Customers are expected to continue to be tight fisted when it comes to technology spending.  While these customers are likely to choose VMW over a competitor due to the cost savings aspect, the competitive advantage will likely not make up for the industry weakness.

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SOURCE: http://zachstocks.com/2009/04/vmw/