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Server virtualization juggernaut VMware smashed through the upper range of its guidance in its second quarter and just kept on going, with sales of $921.2m, which were up 36.7 per cent.

That was considerably more impressive than the $860m to $880m that VMware had been expecting. But even more impressive was net income growth, which nearly tripled to $220.2m.

You might think, however, that with the vSphere 5.0 stack – which was announced last week – being just around the corner, and with a new pricing model that charges customers extra for fat virtual memory configurations on their virtual servers, maybe some people caught wind of the price increase and started buying vSphere 4.1 licenses early to avoid it.

This is certainly a reasonable assumption, given that customers with current maintenance contracts on the vSphere 4.0 and 4.1 releases can get the code for same edition in the vSphere 5.0 stack at no cost.

But both Peek and VMware president and CEO Paul Maritz said that what drove the early ELA bookings in Q2 was a bunch of deals that were expected to hit in July and August that instead came down in June because customers were adding extra capacity beyond what they had in their current ELAs and decided to renew early – something you rarely see in the software business.

No ELA transaction exceeded $10m, by the way, and ELA deals were distributed proportionally across different customer types and geographies, according to Peek.

VMware still does about 75 per cent of its sales through partner channels indirectly, Peek said, and they helped push software license sales up 43.6 per cent to $464.8m. VMware's overall services revenues came to $456.4m in the quarter, up 30.3 per cent.

Peek said that sales in the United States rose by 35 per cent to $450m, while sales outside of the country rose by 38 per cent, to $471m. VMware doesn't give out specifics by region beyond this, but Peek said that the Asia/Pacific region did well, especially in Australia, China, and Japan. As for EMEA, he said that the quarter was a smidgen better than expected thanks to the ELA renewal boost, but that the company continues to be concerned about the macroeconomic climate in Europe.

Despite that, and thanks to booming adoption of its virtualization wares, Peek said that Wall Street should expect for VMware to continue to do acquisitions and add employees at the same pace it has thus far in 2011. VMware now has 10,400 employees, up 1,400 from the beginning of the year, with 1,000 coming into the company in the second quarter, about half from acquisitions and half from direct hires.

Because it is growing so fast, VMware is shelling out $225m to Stanford University to get its hands on 70 acres of land adjacent to the 30 acres it already owns in Palo Alto to expand its office campus. VMware will spend another $50m in the second half of this year to begin construction of new office space.

With $3.7bn in cash and equivalents and $2.1bn in unrecognized revenues booked, VMware can indulge in expensive California real estate near its Cardinal stomping grounds.

Looking ahead, VMware has raised its guidance for all of 2011 by $100m, and now expects for revenues to fall between $3.65bn and $3.75bn. That would represent growth of 28 to 32 per cent over 2010. ®

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