VMware Inc. (VMW) reported fourth quarter results after the closing bell on Monday. The company posted a 49.4% decline on GAAP net income to $56.4 million from $111.5 million in the year-ago period. Excluding certain non-recurring items, adjusted earnings per share came in at 16 cents, beating the Zacks Consensus Estimate by 2 cents.
 
VMware, majority owned by EMC Corp. (EMC), is a provider of virtualization solutions from the desktop to the data center. The company’s virtualization platform – vSphere – addresses a range of information technology problems that include cost and operational inefficiencies, business continuity, software lifecycle management and desktop management. VMware works closely with over 900 technology partners, including server, microprocessor, storage, networking and software vendors.
 
During the quarter, VMware’s revenues recorded a strong growth of 18.2% to $608.2 million from $514.6 million in the year-ago period. The growth was primarily driven by year-end capital spending by companies and efforts to promote a new product, vSphere Enterprise Plus. In terms of geographic regions, U.S. revenues rose 15% to $315 million, while international revenues increased 22% to $293 million primarily due to improved demand in China, Japan, Brazil and Europe.
 
VMware spent $136.3 million during the quarter towards research and development, a growth of 23.3% from $110.5 million in the year-ago quarter. Sales and marketing expenses also increased 28.5% to $229.6 million mainly on account of higher sales commissions and global expansion efforts. General and administrative expenses rose 23.8% to $63.7 million primarily due to seasonal increases and higher stock-based compensation. Accordingly, operating income declined 30.3% year over year to $71.2 million, while operating margin contracted by 810 basis points to 11.7%.
 
The company ended the quarter with cash and cash equivalents of $2.5 billion, compared to $1.8 billion in the year-ago period. During the quarter, VMware generated $283.7 million of cash from operations and deployed $23.5 million towards capital expenditure.
 
Moving forward, VMware expects first-quarter 2010 revenues to be in the range of $580 million and $600 million, a growth of 23% to 28% from the first quarter of 2009, citing improved demand and successful promotion of vSphere Enterprise Plus. The Zacks Consensus Estimate, derived from 11 covering analysts, on the company’s first-quarter 2010 earnings is currently pegged at 12 cents per share, which has remained unchanged over the past 3 months. However, the most accurate estimate is slightly bullish at 13 cents per share.
 
Shares of VMware have surged more than 17% to $49.20 in pre-market trading on the New York Stock Exchange.
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