Last year, VMware Inc (NYSE: VMW) was a darling for growth investors. But as of this year, things are not so stellar. The stock fell 26% in after-hours trading because of the jarring news from its quarterly report.

Revenues increased 80% to $412 million, which was below the Street's consensus forecasts of $417 million. Net income came to $78 million, or $0.19 per share

VMware -- which is 85% owned by EMC Corp. (NYSE: EMC) -- develops so-called virtualization software. Basically, the technology helps to reduce the costs of servers and other information technology (IT) resources.

To push growth, VMware has been aggressive in global markets, such as Eastern Europe, Japan, and China. There are also some marquee agreements, such as with SAP (NYSE: SAP).

While it looks like the momentum will continue for the first half of 2008, things are not so hopeful for the remainder of the year. In fact, the company projects a revenue growth rate of 50% for the full-year.

True, a slowdown is inevitable as it gets difficult for a billion-dollar company to keep churning large-size growth rates.

Although, the competitive environment is intensifying. Companies like Citrix (NASDAQ: CTXS), Microsoft (NASDAQ: MSFT), Oracle (NASDAQ: ORCL) and Virtual Iron are getting serious about virtualization. And no doubt, this is likely to put pressure on pricing.

Tom Taulli is the author of various books, including The Complete M&A Handbook. He also operates DealProfiles.com.

VMware: Some glitches in perfection originally appeared on BloggingStocks on Tue, 29 Jan 2008 09:30:00 EST. Please see our terms for use of feeds.