VMware Earnings
VMware had just released their 4th quarter results on Monday after the closing bell. IMO, the numbers are very good but the stock plummeted to around $61 after hours because people (especially investors) have really high expectations for this stock. Revenues have surged 80% from the previous year ($229.6 to $412.5 million), short $5 million of what analysts had expected.
Few months ago, VMW was considered "overvalued", that's why slightly missed revenues lead to a stock price haircut. Having a quarter with revenues slightly below estimates doesn't make this a bad stock. Growth is key. It is still growing at a phenominal rate (50% guidance for next year), although analysts believed that it is a little too low. VMware said that for a software company, it is not easy to achieve an annual growth rate greater than 50%, which essentially means to double the size of the company.
Watch this closely tomorrow. It may drop more but could also offer a good buying opportunity. One thing to note at the conference call is that they are not going to expand into the desktop market. They are more targeted to business companies with servers. In addition to that, they are in a growing virtualization market. This may explain why they have an annual revenue exceeding $1 billion.