WITH ITS BETTER THAN expected first quarter results, Vmware seems to be back in favour with Wall Street and its fickle investors, after pulling off an unexpected 69 per cent revenue hike, when the company itself had only been predicting 50 per cent.

Share holders couldn’t get rid of stock quick enough back in January when Vmware slashed its growth prediction by half, but it seems that (mostly) all is now forgiven, with the company’s net income being reported as $43 million, which translates into 11 cents a share. Analysts had been expecting revenues of only $421.3 million.

This hasn’t made Vmware any more bold in its future predictions though. The company is still cautiously only predicting 55 per cent growth in the second quarter and 50 per cent growth overall for 2008. With rivals Citrix and the Vole snapping at the company’s heals, this is probably a sound, low-key prediction.

Some of the company’s first quarter highlights included their release of Virtual Desktop Manager 2, which lets users securely connect up to virtual desktops, stored in company datacentres, as well as allowing IT admins to manage virtual desktops. The company also released a Vmware Lifecycle Manager to let companies automate the whole complex process of requesting, approving, deploying, updating, and retiring virtual machines.

But with all the stress of having to constantly look over their shoulders, Vmware are having to step up their spending quite significantly in the R&D department, to fend off the competition, shelling out twice as much as they did last quarter (a whopping $119 million). In another telltale sign that the competition has them on their toes, Vmware also boosted its marketing spending by 72 per cent to a total of $149 million.

Virtualisation is hot right now. All the firm has to do is sit tight and weather the Volish onslaught. µ