You know VMware (NYSE: VMW) as a veteran and a pioneer in the virtual-computing industry. Thanks to the virtualization technology that VMware was the first to popularize, data centers run cooler and greener. It takes less electric wattage and manpower to manage a rack full of virtual servers than a handful of big-box servers. This game-changing technology is sweeping the IT industry, and VMware is a clear leader in this red-hot space.

But did you know that VMware also runs a phenomenal cash-machine business model? Last night's third-quarter report gave the company a chance to flex its money-making muscles on a big stage.

Sales jumped 32% year over year to $942 million, and non-GAAP earnings more than doubled to $230 million, or $0.53 per diluted share. Yes, that 24% net margin is nice -- but it's all paper profits that are easily manipulated to meet arbitrary targets.

Cash is king, and we Fools often prefer to see the real green stuff flowing into the bank. On that note, VMware delivered 108% higher free cash flow compared with the year-ago period. That's $494 million, or a staggering 52% of revenues. The biggest driver of those ballooning cash flows is from customers who are signing long-term support contracts, which become deferred or unearned revenues and trickle down the income statement as the contracts get older. Fellow new-age computing specialist Red Hat (NYSE: RHT) practices the same model on a smaller scale, and even mighty Apple (Nasdaq: AAPL) collects a lot of slow, steady income the same way.

Consider that corporate parent EMC (NYSE: EMC) collected about $1.1 billion of free cash in the same period on five times larger sales, and you get a sense of VMware's tremendous success where it matters most.

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