VMware stock plunges more than 30 pct

VMware Inc.'s high-flying stock plunged by more than 30 percent Tuesday as investors reacted to a disappointing fourth-quarter earnings report that raised worries about the business software maker's ability to cope with tougher competition and a slowing U.S. economy.

The jarring descent shoved VMware's shares down to their lowest levels since the first few days after the Palo Alto-based company mesmerized Wall Street with its stock market debut last August.

It marked Silicon Valley's biggest initial public offering since Google Inc. in 2004, triggering a buying spree that more than quadrupled VMware shares from their IPO price of $29.

VMWare became a hot commodity by leading a computing trend known as “virtualization” – a process that enables corporate data centers to lower their expenses on power and equipment by enabling a single computer to function like multiple machines.

Although VMware's stock had drooped since hitting a high of $125.25 in October, investors remained largely bullish about the company's prospects until Tuesday's sell-off.

Sentiments soured after VWware released its fourth-quarter results late Monday.

Although the company's profit more than doubled to exceed analyst expectations, VWware's revenue of $412 million fell $5 million below the estimates guiding Wall Street. What's more, VMware's forecast of 50 percent revenue growth for 2008 was slightly below the 55 percent to 57 percent range envisioned by several analysts.

The letdown caused VMware shares to plummet $26.55, or 32 percent, to $56.45 in Tuesday afternoon trading, erasing about $10 billion in shareholder wealth in the process.

VMware's fourth-quarter performance and 2008 outlook renewed concerns that its growth will decelerate as Microsoft Corp., the world's largest software maker, expands into the virtualization market while several other challengers, including Oracle Corp. and Citrix Systems Inc., also invade the turf.

Analysts also are worried that more companies will curtail their spending on software like VMware's as they brace for a possible recession.

businessBusiness & Real Estate

If you find our journalism valuable and relevant, please consider joining our Examiner membership program.
Find out more at www.sfexaminer.com/join/

Just Posted

A health care worker receives one of the first COVID-19 vaccine doses at Zuckerberg San Francisco General Hospital on Tuesday Dec. 15, 2020. (Courtesy SFgov)
SF to open three large sites for COVID-19 vaccinations

San Francisco is opening large sites where people can receive the COVID-19… Continue reading

Tongo Eisen-Martin, a Bernal Heights resident, named San Francisco’s eighth poet laureate. (Kevin N. Hume/S.F. Examiner)
Tongo Eisen-Martin becomes San Francisco’s eighth poet laureate

Bernal Heights resident Tongo Eisen-Martin has become San Francisco’s eighth poet laureate.… Continue reading

Homeless people's tents can be seen on Golden Gate Avenue in the Tenderloin on Wednesday afternoon, Dec. 16, 2020. (Photo by Ekevara Kitpowsong/S.F. Examiner)
Statewide business tax could bring new funds to combat homelessness

San Francisco could get more than $100 million a year for housing, rental assistance, shelter beds

The Museum of the African Diaspora in San Francisco (a mural by artist Jamie Treacy is pictued) has a lineup of free online programming including activities for youngsters scheduled for Martin Luther King Jr. Day on Jan. 18. (Courtesy Demetri Broxton/Museum of the African Diaspora)
Stanford, Museum of the African Diaspora host MLK Day activities

Online offerings include films, music, discussion

Speaker of the House Nancy Pelosi presides the US House of Representatives vote on the impeachment of US President Donald Trump at the US Capitol, January 13, 2021, in Washington, DC. - The Democrat-controlled US House of Representatives on January 13 opened debate on a historic second impeachment of President Donald Trump over his supporters' attack of the Capitol that left five dead. (SAUL LOEB/AFP via Getty Images/TNS)
House votes 232-197 to impeach Trump a second time

Focus shifts to Senate, where McConnell has signaled he may not stand by president

Most Read