Vmware (VMW) 8-K VMware Reports First-Quarter Results

Exhibit 99.1

VMware Reports First-Quarter Results

Virtualization Leader Grew First Quarter Revenues 69% to $438 Million

PALO ALTO, Calif., April 22, 2008 — VMware, Inc. (NYSE: VMW) the global leader in virtualization solutions from the desktop to the datacenter, today announced financial results for the first quarter of 2008:

• Revenues for the first quarter were $438 million, an increase of 69% compared to the first quarter of 2007.

• GAAP operating income for the first quarter was $48 million, compared to $46 million in the first quarter of 2007. Non-GAAP operating income was $106 million, an increase of 62% over the year-ago quarter.

• GAAP net income for the quarter was $43 million, or $0.11 per diluted share, compared to $41 million, or $0.12 per diluted share, in the year-ago quarter. Non-GAAP net income for the quarter was $88 million, or $0.22 per diluted share, compared to $0.16 a year ago.

“Q1 was another quarter of increased demand for VMware virtualization products and solutions,” said Diane Greene, president and chief executive officer of VMware. “Our strategy to continually deliver superb quality and market-expanding solutions well ahead of the competition is working and we’re advantaging our lead with our well developed multi-tier partner distribution model. We are seeing customers progress more rapidly through the virtualization adoption path; many are now moving right into a VMware based architecture so that they can pool their resources, deliver capacity on demand, and also get an insurance policy for business continuity and disaster recovery.”

First quarter U.S. revenues grew 65% compared to the year-ago quarter on increased demand from large enterprises standardizing on the VMware platform and an increase in the number of smaller transactions delivered through VMware channel partners. International revenues, which increased 74%, were driven in part by triple-digit business growth across Australia and emerging markets including Brazil, China, India and Russia.

Software license revenue grew 73% compared to the same period last year to $294 million and service revenue, including support, subscription and professional services, increased 62% to $144 million.

VMware plans to host a conference call today to review its first-quarter results and discuss its financial outlook. The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and can be accessed via the Web at http://ir.vmware.com. The Internet broadcast and related slides will be available live, and a replay will be available following completion of the live broadcast for approximately 30 days.

First Quarter Highlights

During the first quarter VMware announced and shipped new products and technologies in four key areas: (1) desktop virtualization, (2) datacenter virtualization, (3) management & automation for the datacenter and (4) platform security. VMware announced OEM agreements with four major hardware vendors to pre-install the VMware ESXi hypervisor on their servers. The company announced major enhancements to its channel partner programs to help the more than 13,000 indirect channel partners reselling VMware expand their virtualization practices and drive new customer adoption. This quarter also marked the launch of VMworld Europe, the industry’s first European virtualization conference. Held in Cannes, France, VMworld Europe drew more than 4,500 customers and partners.

Specific, notable quarterly highlights include:

• General availability of VMware Virtual Desktop Manager 2, which allows users to securely connect to their virtual desktops in the datacenter and gives IT administrators an easy and cost-effective way to manage virtual desktops.

• General availability of VMware Lifecycle Manager, which enables companies to implement a consistent and automated process for requesting, approving, deploying, updating, and retiring virtual machines.

• The announcement of VMware VMsafe™, a new security initiative endorsed by more than 20 security vendors that protects applications running in virtual machines in ways previously not possible in physical environments.

Visitwww.vmware.com/go/q108highlights for a comprehensive list of VMware highlights from the first quarter.

Financial Outlook

The following forward-looking statements are based on current expectations and are subject to uncertainties and risks discussed below and in documents filed by VMware with the United States Securities and Exchange Commission. Actual results may differ materially.

• VMware continues to expect 2008 revenue growth of approximately 50% compared to 2007.

• Second quarter 2008 revenues are expected to increase approximately 55% compared to the second quarter of 2007.

About VMware

VMware (NYSE: VMW) is the global leader in virtualization solutions from the desktop to the datacenter. Customers of all sizes rely on VMware to reduce capital and operating expenses, ensure business continuity, strengthen security and go green. With 2007 revenues of $1.3 billion, more than 100,000 customers and nearly 14,000 partners, VMware is one of the fastest growing public software companies. VMware is headquartered in Palo Alto, California and on the web atwww.vmware.com.

VMware is a registered trademark of VMware, Inc. in the United States and/or other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective companies.

Use of Non-GAAP Financial Measures

VMware has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. These non-GAAP financial measures, which are used as measures of VMware’s performance, should be considered in addition to, not as a substitute for or in isolation from, measures of VMware’s financial performance prepared in accordance with GAAP. These measures differ from GAAP in that they exclude stock-based compensation, amortization of intangible assets, the write-off of in-process research and development, employer payroll tax on employee stock transactions, and the net effect of the amortization and capitalization of software under Statement of Financial Accounting Standards No. 86 (“FAS86”), VMware’s bases for these adjustments are described below.

VMware’s management uses the non-GAAP financial measures referenced in this release and shown in the accompanying schedules to gain an understanding of VMware’s comparative operating results (when comparing such results with previous periods or forecasts) and its future prospects and excludes the above-listed items (stock-based compensation, amortization of intangible assets, write-off of in-process research and development, employer payroll tax on employee stock transactions, and the net effect of the amortization and capitalization of software under FAS86) from its internal operating plans and measurement of financial performance, including budgeting, calculating bonus payments, and forecasting future periods. These non-GAAP financial measures are used by VMware’s management in their financial and operating decision-making because management believes they reflect VMware’s ongoing business in a manner that allows meaningful period-to-period comparisons. As the non-GAAP financial measures exclude expenses that VMware believes are not reflective of ongoing operating results, management believes the non-GAAP financial measures enable management to better analyze trends in its business. VMware’s management also believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating VMware’s current operating results and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner VMware’s current financial results with VMware’s past financial results.

In addition to the foregoing, management believes that these non-GAAP measures are useful to investors and others in assessing VMware’s operating performance due to the following factors:

• Although stock-based compensation is an important aspect of the compensation of VMware’s employees and executives, determining the fair value of the stock-based instruments involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the future exercise or termination of the related stock-based awards. VMware does not believe these non-cash expenses are reflective of ongoing operating results.

• The amount of employer payroll taxes on stock-based compensation is dependent on VMware’s stock price and the timing and size of exercise by employees of their stock options and of vesting in restricted stock, over which management has limited to no control, and as such does not correlate to VMware’s operation of the business.

• VMware’s amortization of intangible assets includes the effects of EMC’s acquisition of VMware in January 2004. Also, VMware does not acquire businesses on a predictable cycle. VMware therefore believes that the presentation of non-GAAP measures that adjust for the amortization of intangible assets and the write-off of in-process research and development, provide investors and others with a consistent basis for comparison across accounting periods and, therefore, are useful to investors and others in helping them to better understand VMware’s operating results and underlying operational trends.

• The amortization and capitalization of software under FAS86 can vary significantly depending upon the timing of products reaching technological feasibility. VMware does not believe that the variance in operating results caused by the net effect of applying FAS86 properly reflect underlying operational trends.

VMware’s non-GAAP financial measures may be defined differently than similar terms used by other companies and, accordingly, may not be comparable to similarly-titled non-GAAP financial measures used by other companies. There are significant limitations associated with the use of non-GAAP financial measures. Specifically, the non-GAAP financial measures that exclude stock-based compensation, intangible amortization, in-process research and development, and the net effect of the amortization and capitalization of software under FAS86, do not include all items of income and expense that affect VMware’s operations. More specifically, in the case of stock-based compensation, if VMware did not pay out a portion of its compensation in the form of stock-based compensation and related employer payroll taxes, the cash salary expense included in costs of revenues and operating expenses would be higher. Payment of employer payroll taxes on stock-based compensation is also a cash expense for VMware and impacts the Company’s cash position. In the case of intangible amortization, while not directly affecting VMware’s cash position, it represents the loss of value of intangible assets over time. As a result, non-GAAP net income and non-GAAP net income per share, which exclude this expense, do not reflect the full economic loss in value of those intangible assets. Management compensates for these limitations by reconciling the non-GAAP financial measures to VMware’s financial results as determined in accordance with GAAP, which reconciliations are set forth in the accompanying schedules to this release, in the current report on Form 8-K furnished to the SEC on the date hereof and onhttp://ir.vmware.com.

Forward-Looking Statements

Statements made in this press release which are not statements of historical fact are forward-looking statements and are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate, but are not limited, to our financial outlook for revenue growth during the second quarter of 2008 and throughout 2008, continuing customer adoption and deployment of our products and architecture, levels of demand for our products including market size and leadership, ongoing development and delivery of innovative new products and continuing development of our distribution model. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in consumer or information technology spending; (iii) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization market, and new product and marketing initiatives by our competitors; (iv) factors that affect timing of license revenue recognition such as product announcements and beta programs; (v) our customers’ ability to develop, and to transition to, new products, (vi) the uncertainty of customer acceptance of emerging technology; (viii) rapid technological and market changes in virtualization software; (ix) changes to product development timelines; (x) VMware’s relationship with EMC Corporation, and EMC’s ability to control matters requiring stockholder approval, including the election of VMware’s board members; (xi) our ability to protect our proprietary technology; (xii) our ability to attract and retain highly qualified employees; and (xiii) fluctuating currency exchange rates. These forward looking statements are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including the report on Form 10-K for the fiscal year ended December 31, 2007, which could cause actual results to vary from expectations. VMware disclaims any obligation to update any such forward-looking statements after the date of this release.

Contacts:

Michael Haase

VMware Investor Relations

mhaase@vmware.com

650-427-2875

Greg Eden

VMware Public Relations

eden@vmware.com

650-427-1095

Ulysses King

OutCast Communications

ulysses@outcastpr.com

415-345-4731

VMware, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	March 31, 2008		December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	1,306,011	$	1,231,168
Accounts receivable, less allowance for doubtful accounts of $1,439 and $1,603		284,309		283,824
Deferred tax asset		74,036		54,386
Other current assets		40,392		33,956
Total current assets		1,704,748		1,603,334
Property and equipment, net		325,906		276,983
Other assets, net		62,533		71,695
Deferred tax asset		88,907		72,249
Intangible assets, net		37,622		32,073
Goodwill		681,742		639,366
Total assets	$	2,901,458	$	2,695,700
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	88,798	$	61,503
Accrued expenses		161,950		173,610
Due to EMC, net		20,005		2,759
Income taxes payable to EMC, current portion		34,858		68,823
Deferred revenue, current portion		402,326		363,317
Total current liabilities		707,937		670,012
Note payable to EMC		450,000		450,000
Deferred revenue, net of current portion		238,801		189,479
Deferred tax liability		30,349		27,327
Income taxes payable to EMC, net of current portion		21,575		18,265
Commitments and contingencies
Stockholders’ equity:
Class A common stock, par value $.01; authorized 2,500,000 shares; issued and outstanding 83,679 and 82,924 shares		837		829
Class B convertible common stock, par value $.01; authorized 1,000,000 shares; issued and outstanding 300,000 shares		3,000		3,000
Additional paid-in capital		1,442,154		1,352,788
Accumulated surplus (deficit)		6,805		(16,000	)
Total stockholders’ equity		1,452,796		1,340,617
Total liabilities and stockholders’ equity	$	2,901,458	$	2,695,700

VMware, Inc.

CONSOLIDATED INCOME STATEMENTS

(in thousands, except per share amounts)

	For the Three Months Ended March 31,
	2008			2007
Revenues:
License	$	293,980		$	169,557
Services		144,195			89,138
		438,175			258,695
Operating expenses:
Cost of license revenues		22,859			20,556
Cost of services revenues		54,311			23,468
Research and development		119,255			54,958
Sales and marketing		149,257			86,707
General and administrative		44,102			26,624
Operating income		48,391			46,382
Investment income		8,004			1,704
Interest income (expense) with EMC, net		(5,819	)		1,273
Other expense, net		454			59
Income before taxes		51,030			49,418
Income tax provision		7,975			8,338
Net income	$	43,055		$	41,080
Net income per weighted average share, basic for Class A and Class B	$	0.11		$	0.12
Net income per weighted average share, diluted for Class A and Class B	$	0.11		$	0.12
Weighted average shares, basic for Class A and Class B		381,026			332,500
Weighted average shares, diluted for Class A and Class B		398,063			332,500

VMware, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the Three Months Ended March 31,
	2008			2007
Cash flows from operating activities:
Net income	$	43,055		$	41,080
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		37,434			21,197
Stock-based compensation, excluding amounts capitalized		42,161			11,644
Excess tax benefits from stock-based compensation		(22,692	)		—
Other adjustments		1,336			563
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		846			46,361
Other assets		(8,594	)		(602	)
Due to (from) EMC, net		17,246			(56,178	)
Accounts payable		7,472			(1,968	)
Accrued expenses		(15,305	)		960
Income taxes payable to EMC		(21,596	)		14,696
Deferred income taxes, net		(36,344	)		(6,591	)
Deferred revenue		88,161			33,740
Net cash provided by operating activities		133,180			104,902
Cash flows from investing activities:
Additions to property and equipment, net		(49,022	)		(16,584	)
Capitalized software development costs		(4,164	)		(6,672	)
Business acquisitions, net of cash acquired		(33,289	)		—
Decrease in restricted cash		896			688
Net cash used in investing activities		(85,579	)		(22,568	)
Cash flows from financing activities:
Proceeds from exercises of stock options		23,669			—
Excess tax benefits from stock-based compensation		22,692			—
Shares repurchased for tax withholdings on vesting of restricted stock		(19,119	)		—
Net cash provided by financing activities		27,242			—
Net increase in cash and cash equivalents		74,843			82,334
Cash and cash equivalents at beginning of the period		1,231,168			176,134
Cash and cash equivalents at end of the period	$	1,306,011		$	258,468

VMware, Inc.

RECONCILIATION OF GAAP TO NON-GAAP DATA

For the Three Months Ended March 31, 2008

(in thousands, except per share amounts)

(unaudited)

	GAAP			Stock-Based Compensation			Employer Payroll Tax on Employee Stock Transactions			Intangible Amortization			Capitalized Software Development Costs (1)			Stock-based Compensation Included in Capitalized Software Development Costs			Non-GAAP, as adjusted
Operating expenses:
Cost of license revenues	$	22,859			(263	)		(2	)		(2,310	)		(14,870	)				$	5,414
Cost of services revenues	$	54,311			(3,261	)		(37	)										$	51,013
Research and development	$	119,255			(21,097	)		(797	)					5,036			(873	)	$	101,524
Sales and marketing	$	149,257			(11,301	)		(288	)		(894	)							$	136,774
General and administrative	$	44,102			(6,239	)		(157	)		(647	)							$	37,059
Operating income	$	48,391			42,161			1,281			3,851			9,834			873		$	106,391
Income before taxes	$	51,030			42,161			1,281			3,851			9,834			873		$	109,030
Income tax provision	$	7,975			8,500			328			1,411			2,182			175		$	20,571
Quarterly tax rate		15.6	%																	18.9	%
Net income	$	43,055			33,661			953			2,440			7,652			698		$	88,459
Net income per weighted average share, basic for Class A and Class B	$	0.11		$	0.09		$	0.00		$	0.01		$	0.02		$	0.00		$	0.23
Net income per weighted average share, diluted for Class A and Class B	$	0.11		$	0.08		$	0.00		$	0.01		$	0.02		$	0.00		$	0.22
Weighted average shares, basic for Class A and Class B		381,026			381,026			381,026			381,026			381,026			381,026			381,026
Weighted average shares, diluted for Class A and Class B		398,063			398,063			398,063			398,063			398,063			398,063			398,063

(1) For the first quarter of 2008, VMware capitalized $5.0 million (including $0.9 million of stock-based compensation) of costs incurred for the development of software products. Amortization expense from previously capitalized amounts was $14.9 million for the first quarter of 2008.

VMware, Inc.

RECONCILIATION OF GAAP TO NON-GAAP DATA

For the Three Months Ended March 31, 2007

(in thousands, except per share amounts)

(unaudited)

	GAAP			Stock-Based Compensation			Intangible Amortization			Capitalized Software Development Costs (1)			Stock-based Compensation Included in Capitalized Software Development Costs			Non-GAAP, as adjusted
Operating expenses:
Cost of license revenues	$	20,556			(36	)		(5,215	)		(7,987	)		—		$	7,318
Cost of services revenues	$	23,468			(494	)		—			—			—		$	22,974
Research and development	$	54,958			(6,392	)		—			7,599			(927	)	$	55,238
Sales and marketing	$	86,707			(2,944	)		(577	)		—			—		$	83,186
General and administrative	$	26,624			(1,778	)		(493	)		—			—		$	24,353
Operating income	$	46,382			11,644			6,285			388			927		$	65,626
Income before taxes	$	49,418			11,644			6,285			388			927		$	68,662
Income tax provision	$	8,338			2,675			2,325			144			343		$	13,825
Quarterly tax rate		16.9	%														20.1	%
Net income	$	41,080			8,969			3,960			244			584		$	54,837
Net income per weighted average share, basic for Class A and Class B	$	0.12		$	0.03		$	0.01		$	0.00		$	0.00		$	0.16
Net income per weighted average share, diluted for Class A and Class B	$	0.12		$	0.03		$	0.01		$	0.00		$	0.00		$	0.16
Weighted average shares, basic for Class A and Class B		332,500			332,500			332,500			332,500			332,500			332,500
Weighted average shares, diluted for Class A and Class B		332,500			332,500			332,500			332,500			332,500			332,500

(1) For the first quarter of 2007, VMware capitalized $7.6 million (including $0.9 million of stock-based compensation), of costs incurred for the development of software products. Amortization expense from previously capitalized amounts was $8.0 million for the first quarter of 2007.