"You witch me in it;
Surprise me to the very brink of tears:
Lend me a fool's heart and a woman's eyes,
And I'll beweep these comforts, worthy senators."
-- From "Timon of Athens," by William Shakespeare, 1623
You know VMware
VMware just reported first-quarter GAAP earnings of $0.19 per share, modestly above the year-ago period's $0.18 per share. Sales landed at $634 million, and that 35% growth was driven harder by support service contracts than by license sales.
License revenues increased 21% year over year while services gained a more impressive 51%, and the service component is now 3% larger than the software sales themselves. This is exactly how open-source software vendors like Red Hat
The idea is simple: once your installed base of software (or surgery robots, or razor handles) reaches critical mass, the renewable sales on support services (or disposable attachments, or razor blades) accelerate past the basic sales very quickly. Assuming that VMware doesn't lose a significant chunk of its customers to rivals like Microsoft
On top of that solid business model, VMware faces enormous growth opportunities as virtual computing and the cloud computing tricks it enables are gaining a foothold in businesses everywhere. This Rule Breaker has doubled in the last year -- and I see a lot more growth coming down the pipe.
Fool contributor Anders Bylund owns shares in Intuitive Surgical, but he holds no other position in any of the companies discussed here. Microsoft is a Motley Fool Inside Value selection. Intuitive Surgical and VMware are Motley Fool Rule Breakers picks. Procter & Gamble is a Motley Fool Income Investor pick. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Procter & Gamble. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors. We need more Shakespeare on Wall Street, so Anders is doing his part every National Poetry Month.