VMWare (VMW), one of the hottest IPOs of 2007, was crushed in the after hours tonight (down 27%) after reporting 4th quarter earnings.
Revenue of $412 million came in $5 million shy of analysts estimates and their revenue forecast for 2008 was about $20 million beneath analysts estimates (VMW 4Q Earnings Release, Conference Call Transcript).
This kind of thing always strikes me as overkill. Because of a $5 million miss and a $20 million forecast shortfall next year, more than $10 billion in market value gets knocked off the stock. Doesn’t quite seem proportionate.
The problem, however, is that the stock is just so pricey. It got so speculative and ridiculous – and now the air is coming out (VMW 6 Month Chart).
All the highfliers are getting held to a different standard. The momentum game is over. The rules have changed.
Disclosure: Top Gun has no position in VMWare (VMW) shares.