Increased customer-adoption of VMware Infrastructure was a significant driver in growing our revenues. For Q3 2007, VMware total consolidated revenue was $358 million, an increase of 90% compared to the year-ago quarter. Q3 2007 was the first quarter in which VMware’s trailing four-quarter revenues exceeded $1 billion.
- We saw strength in all geographies. Our non-U.S. revenues grew faster than our U.S. revenues and represented 44% of our total revenues during the quarter. This compares to 42% for the year-ago quarter.
- We continued to invest in our business across the board to increase our footprint in the market, develop new products and meet the high expectations of our customers and partners. The IPO brought an upsurge in strong motivated people wanting to join VMware. Since the beginning of Q2, we have increased our headcount by about 1,500 so we now have a worldwide headcount total around 4,500.
- We acquired two companies during the quarter and recently closed on a third. Two of these companies increase our development activity outside the United States.
Customers continue to standardize on VMware Infrastructure for their data centers because of the increasing value they get in moving to a VMware Infrastructure architecture
- VMware Infrastructure customers benefit from flexibility, reliability and significant cost and power savings.
- A recent VMware customer survey showed that:
--Nearly 90% of VMware Infrastructure customers are using the software in production environments for enterprise applications, databases and other key applications such as Exchange.
--More than 60% of VMware Infrastructure customers have deployed transparent mobility across physical machines – VMotion – into their production environments.
--More than 40% of VMware Infrastructure customers are leveraging the High Availability (HA) and Distributed Resource Scheduling (DRS) features in their production environments.
--More than 40% of VMware Infrastructure customers have standardized on the VMware architecture for hosting new applications in the data center.
- During the quarter VMware saw increased adoption of VMware Virtual Desktop Infrastructure (VDI), backed by the VMware Infrastructure architecture, to centrally managed and secure enterprise desktops.
During the quarter VMware continued to execute on its strategy of building high-quality, high value products and bringing them to market with our partners for the benefit of companies of all sizes
- At VMworld in September we announced VMware ESX Server 3i, the next generation hypervisor that will allow servers to come virtualization enabled and plug and play into VMware Infrastructure. Our system vendor partners supported us in the announcement and we expect them to begin to ship servers with ESX 3i embedded as early as the current quarter.
- We also introduced innovative, new desktop management and automated disaster recovery solutions.
- We shipped VMware Fusion for Mac users and have already sold more than 90 thousands copies in two months, and the product has won 2 editor’s choice awards.
- Earlier this month, we announced a major update to our VMware Infrastructure software suite. We have three offerings from the entry-level to the enterprise edition, offering the best value in virtualization for every segment and at every price point in the marketplace and proactively continue to set the bar for virtualization deployment well ahead of alternatives.
VMware and our partners continue to successfully add to all customer segments from consumer to SMB to Commercial to Enterprise and across all industries
- We have expanded our distribution channel to over 6,000 partners, an increase of over 1,000 during Q3.
- Our technology partnerships continue to grow as well. Since the end of March, we have nearly doubled the number of our technology collaboration partnerships.
Our IPO was about more than VMware, it was about the new virtualization industry
- Virtualization is driving what is turning out to be a complete refresh of the data center. Processors, servers, storage arrays, network switches, operating systems, system management software, and more recently, application software are all being optimized for running and running in a virtualization-based data center architecture.
- As our customers look to standardize on VMware Infrastructure, they also are refreshing all of their systems and software to take advantage of all of the other significant advances that the companies in the tech industry have been coming out with over the past few years.
- It is an unprecedented comprehensive refresh cycle, in part funded by the huge cost savings and efficiencies that come with the re-architecture.
- As a result of our IPO, the market now counts VMware among the five most valuable software companies in the world (MSFT, ORCL, SAP, VMW, ADBE).
 
Fast Facts
Founded: 1998
Headquarters: Palo Alto, California, USA – 40+ offices worldwide
Ticker Symbol: NYSE: VMW
Run Rate Revenue: $1.4+ billion – Q3, 2007 annualized; Trailing 12 months $1+ billion
Revenue:
2007: Q1 $258.7 million, Q2 $296.8 million, Q3 $358 million – In Q3, 44% of revenue was from customers outside the US
2006: $703.9 million
2005: $387.1 million 2004: $218.8 million
Employees: Approximately 4,500 worldwide
Customers: All of the Fortune 100, 910+ of the Fortune 1,000, small and medium businesses and consumers – VMware’s customer base for its server solutions includes more than 20,000 organizations of all sizes across all industries
Technology Partners: 350+ including leading server, processor, storage, networking and software vendors
Channel Partners: 6,000+ including distributors, resellers, x86 system vendors and systems integrators – VMware derives more than 75% of its revenues from its channel partners
VMware Certified Professionals: 15,000+
Solutions: 4 – Infrastructure Optimization, Business Continuity, Software Lifecycle Management, Desktop Management 
Q3 Named and Un-named Customer References
Customer excitement for virtualization and their appreciation for the quality and reliability of our products really drove our business during the quarter. We saw customers of all sizes and in every one of our major geographies invest in our virtualization software: For example:
- IGT, the world’s largest slot machine manufacturer signed a large desktop VDI deal. The slot machine desktop images will go into data center managed virtual machines and then be piped out to all of their physical slot machines. The benefit of improved centralized manageability and security convinced the customer chose VMware Infrastructure for the manageability and security along with VMware Infrastructure’s unique distributed desktop management capabilities.
- We signed a multi-million, three-year contract with a major U.S.-based telecom. This company plans to deploy our flagship third-generation VMware Infrastructure product suite across a very complex, distributed IT organization that today spans more than a dozen data centers in North America alone.
- Pennsylvania State University, which is one of the ten largest public universities in the U.S., invested across our portfolio to help improve how they manage their data centers, handle remote access and prepare for unplanned disruptions to its business. During the third quarter Penn State purchased VMware Infrastructure 3, as well as licenses for a number of our desktop-based products including ACE, Workstation and Fusion.
- We signed a multi-million dollar ELA with a leading US supplier of healthcare technology. This company had already calculated an annual cap/ex savings of approximately $1.6 million. Now, they are using VMware products and architecture to improve their operational effectiveness. The company has reduced the time it takes to deploy a new business application, with full quality of service guarantees, from 6 weeks to 8 hours. This company has also moved to data centers designed around VMware technology to better utilize floor space, energy and hardware, in addition to providing centralized management.
- We signed a multi-million dollar deal with a European-based automotive manufacturer. This company added several hundred, enterprise-level VMware Infrastructure 3 licenses to its existing VMware investment with the stated goal of standardizing on VMware-enabled infrastructure across its organization.
- In Asia we saw a major BPO organization in the region sign a two-year enterprise license agreement with the intent of adopting a "Virtualization First" strategy for its entire server infrastructure.  
Q&A
Q. What acquisitions were made in Q3?
A. Dunes, a Swiss company that provides IT process orchestration software for virtual environments; Determina, a Silicon Valley company that provides advanced security technology; and last week we completed the acquisition of Sciant in Bulgaria, an engineering outsourcing company we had been contracting with. None of the terms of the deal were disclosed.
Q. How do you position yourself vs. Microsoft, Xen, XenSource. What is your response to new product developments on the part of these companies, like the IBM/HP Virtual Iron announcement? How will you keep 90% market share?
A. We feel that we're in the best competitive position in terms of products, market position and reach. The critical axes of product selection for customers are robustness, maturity, functionality and openness. On these axes, we enjoy a significant advantage. Looking into the future, we intend to continue building out our product advantages and continue broadening the value proposition even further.
Q. What does your customer base look like?
A. We have a product and a price point for every segment of the market. Our customers include all of the Fortune 100, 910+ of the Fortune 1,000, small and medium businesses and consumers. VMware’s customer base for its server solutions includes more than 20,000 organizations of all sizes across all industries.
- We saw strength in all geographies. Our non-U.S. revenues grew faster than our U.S. revenues and represented 44% of our total revenues during the quarter. This compares to 42% for the year-ago quarter.
- We continued to invest in our business across the board to increase our footprint in the market, develop new products and meet the high expectations of our customers and partners. The IPO brought an upsurge in strong motivated people wanting to join VMware. Since the beginning of Q2, we have increased our headcount by about 1,500 so we now have a worldwide headcount total around 4,500.
- We acquired two companies during the quarter and recently closed on a third. Two of these companies increase our development activity outside the United States.
Customers continue to standardize on VMware Infrastructure for their data centers because of the increasing value they get in moving to a VMware Infrastructure architecture
- VMware Infrastructure customers benefit from flexibility, reliability and significant cost and power savings.
- A recent VMware customer survey showed that:
--Nearly 90% of VMware Infrastructure customers are using the software in production environments for enterprise applications, databases and other key applications such as Exchange.
--More than 60% of VMware Infrastructure customers have deployed transparent mobility across physical machines – VMotion – into their production environments.
--More than 40% of VMware Infrastructure customers are leveraging the High Availability (HA) and Distributed Resource Scheduling (DRS) features in their production environments.
--More than 40% of VMware Infrastructure customers have standardized on the VMware architecture for hosting new applications in the data center.
- During the quarter VMware saw increased adoption of VMware Virtual Desktop Infrastructure (VDI), backed by the VMware Infrastructure architecture, to centrally managed and secure enterprise desktops.
During the quarter VMware continued to execute on its strategy of building high-quality, high value products and bringing them to market with our partners for the benefit of companies of all sizes
- At VMworld in September we announced VMware ESX Server 3i, the next generation hypervisor that will allow servers to come virtualization enabled and plug and play into VMware Infrastructure. Our system vendor partners supported us in the announcement and we expect them to begin to ship servers with ESX 3i embedded as early as the current quarter.
- We also introduced innovative, new desktop management and automated disaster recovery solutions.
- We shipped VMware Fusion for Mac users and have already sold more than 90 thousands copies in two months, and the product has won 2 editor’s choice awards.
- Earlier this month, we announced a major update to our VMware Infrastructure software suite. We have three offerings from the entry-level to the enterprise edition, offering the best value in virtualization for every segment and at every price point in the marketplace and proactively continue to set the bar for virtualization deployment well ahead of alternatives.
VMware and our partners continue to successfully add to all customer segments from consumer to SMB to Commercial to Enterprise and across all industries
- We have expanded our distribution channel to over 6,000 partners, an increase of over 1,000 during Q3.
- Our technology partnerships continue to grow as well. Since the end of March, we have nearly doubled the number of our technology collaboration partnerships.
Our IPO was about more than VMware, it was about the new virtualization industry
- Virtualization is driving what is turning out to be a complete refresh of the data center. Processors, servers, storage arrays, network switches, operating systems, system management software, and more recently, application software are all being optimized for running and running in a virtualization-based data center architecture.
- As our customers look to standardize on VMware Infrastructure, they also are refreshing all of their systems and software to take advantage of all of the other significant advances that the companies in the tech industry have been coming out with over the past few years.
- It is an unprecedented comprehensive refresh cycle, in part funded by the huge cost savings and efficiencies that come with the re-architecture.
- As a result of our IPO, the market now counts VMware among the five most valuable software companies in the world (MSFT, ORCL, SAP, VMW, ADBE).
 
Fast Facts
Founded: 1998
Headquarters: Palo Alto, California, USA – 40+ offices worldwide
Ticker Symbol: NYSE: VMW
Run Rate Revenue: $1.4+ billion – Q3, 2007 annualized; Trailing 12 months $1+ billion
Revenue:
2007: Q1 $258.7 million, Q2 $296.8 million, Q3 $358 million – In Q3, 44% of revenue was from customers outside the US
2006: $703.9 million
2005: $387.1 million 2004: $218.8 million
Employees: Approximately 4,500 worldwide
Customers: All of the Fortune 100, 910+ of the Fortune 1,000, small and medium businesses and consumers – VMware’s customer base for its server solutions includes more than 20,000 organizations of all sizes across all industries
Technology Partners: 350+ including leading server, processor, storage, networking and software vendors
Channel Partners: 6,000+ including distributors, resellers, x86 system vendors and systems integrators – VMware derives more than 75% of its revenues from its channel partners
VMware Certified Professionals: 15,000+
Solutions: 4 – Infrastructure Optimization, Business Continuity, Software Lifecycle Management, Desktop Management 
Q3 Named and Un-named Customer References
Customer excitement for virtualization and their appreciation for the quality and reliability of our products really drove our business during the quarter. We saw customers of all sizes and in every one of our major geographies invest in our virtualization software: For example:
- IGT, the world’s largest slot machine manufacturer signed a large desktop VDI deal. The slot machine desktop images will go into data center managed virtual machines and then be piped out to all of their physical slot machines. The benefit of improved centralized manageability and security convinced the customer chose VMware Infrastructure for the manageability and security along with VMware Infrastructure’s unique distributed desktop management capabilities.
- We signed a multi-million, three-year contract with a major U.S.-based telecom. This company plans to deploy our flagship third-generation VMware Infrastructure product suite across a very complex, distributed IT organization that today spans more than a dozen data centers in North America alone.
- Pennsylvania State University, which is one of the ten largest public universities in the U.S., invested across our portfolio to help improve how they manage their data centers, handle remote access and prepare for unplanned disruptions to its business. During the third quarter Penn State purchased VMware Infrastructure 3, as well as licenses for a number of our desktop-based products including ACE, Workstation and Fusion.
- We signed a multi-million dollar ELA with a leading US supplier of healthcare technology. This company had already calculated an annual cap/ex savings of approximately $1.6 million. Now, they are using VMware products and architecture to improve their operational effectiveness. The company has reduced the time it takes to deploy a new business application, with full quality of service guarantees, from 6 weeks to 8 hours. This company has also moved to data centers designed around VMware technology to better utilize floor space, energy and hardware, in addition to providing centralized management.
- We signed a multi-million dollar deal with a European-based automotive manufacturer. This company added several hundred, enterprise-level VMware Infrastructure 3 licenses to its existing VMware investment with the stated goal of standardizing on VMware-enabled infrastructure across its organization.
- In Asia we saw a major BPO organization in the region sign a two-year enterprise license agreement with the intent of adopting a "Virtualization First" strategy for its entire server infrastructure.  
Q&A
Q. What acquisitions were made in Q3?
A. Dunes, a Swiss company that provides IT process orchestration software for virtual environments; Determina, a Silicon Valley company that provides advanced security technology; and last week we completed the acquisition of Sciant in Bulgaria, an engineering outsourcing company we had been contracting with. None of the terms of the deal were disclosed.
Q. How do you position yourself vs. Microsoft, Xen, XenSource. What is your response to new product developments on the part of these companies, like the IBM/HP Virtual Iron announcement? How will you keep 90% market share?
A. We feel that we're in the best competitive position in terms of products, market position and reach. The critical axes of product selection for customers are robustness, maturity, functionality and openness. On these axes, we enjoy a significant advantage. Looking into the future, we intend to continue building out our product advantages and continue broadening the value proposition even further.
Q. What does your customer base look like?
A. We have a product and a price point for every segment of the market. Our customers include all of the Fortune 100, 910+ of the Fortune 1,000, small and medium businesses and consumers. VMware’s customer base for its server solutions includes more than 20,000 organizations of all sizes across all industries.
