The stock lost more than 30 per cent of its value, wiping US$11 billion ($12.3 billion) off shareholder value.
VMware, a virtualisation specialist, listed last year in the biggest IPO since Google went public in 2004. VMware stock immediately soared.
The company has been a pioneer in the virtualisation market, growing revenues to more than US$1.3 billion in the past decade and helping corporate datacenters to drastically reduce power costs and hardware overheads in the process.
But reports in the US say investors have been spooked by less than stellar fourth quarter results amid fears that industry giants like Microsoft, Oracle and Citrix Systems have now turned an eye to virtualisation and will continue to squeeze VMware performance.
VMware reported fourth quarter revenue of US$412 million, an increase of 80 per cent over the year-ago quarter, but slightly below company forecasts.
What appears to have spooked the market is its forecasts. The company says it expects revenue to grow 50 per cent in 2008, somewhat lower than the consensus analyst view of growth between 55 per cent and 57 per cent.
VMware president and chief executive Diane Greene downplayed the more serious entry of others into virtualisation market, saying the company had a market lead and deeper channel relationships that any competitor.
“VMware executed at a remarkable pace in 2007 as customer interest and partner attention increased several fold,” Ms Greene said. “As others begin to enter the market, VMware and our partners are continuing to broaden and deepen our highly reliable end-to-end virtualisation solutions.
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