Analyst Laura Lederman estimated that the company would earn $0.80 per share (pro forma) in 2007, $1.14 per share (pro forma) in 2008, and $1.60 per share (pro forma) in 2009.

“We have covered the software space for more than 20 years and rarely have we found a solution with a cost-savings proposition as compelling as virtualization software,” Lederman said. “In fact, many software products do not deliver a positive quantifiable return on investment, but VMware’s virtualization software can greatly lower IT costs and increase hardware utilization (from 10%-15% to roughly 80%) by aggregating servers into shared pools of IT capacity. This tremendous savings in hardware and management resources explains why the server virtualization market and, in particular, VMware are growing so quickly.”

Lederman continued, “VMware’s dominant market position (80%-85% share) should make it one of the primary beneficiaries of the rapid growth of virtualization, a market that is, in our estimation, only 20% penetrated (on new servers shipped). We expect VMware will be able to grow its top line 43% annually over the next three years. The company primarily serves the x86 server virtualization market, a $1.5 billion space that we estimate will see 40% annual growth over the next three years. Combining VMware’s target markets (server, desktop, storage, and application virtualization), we project a total market of $10 billion by 2011.”

William Blair & Company, L.L.C. has received compensation for investment banking services from the company within the past 12 months, or expects to receive or intends to seek compensation for investment banking services in the next 3 months.

William Blair & Company, L.L.C. (www.williamblair.com) is a Chicago-based investment firm offering investment banking, asset management, equity research, institutional and private brokerage, and private capital to individual, institutional, and issuing clients.