(RTTNews) -  Virtualization solutions provider VMware, Inc. (VMW: News ), Wednesday reported a decline in second-quarter profit with license revenues declining 20% due to difficult macro economic conditions. Services revenues, however, increased 32% and almost offset the decline in license revenues. Revenues and earnings for the quarter came in ahead of analysts' consensus. The company also issued its revenue guidance for the third quarter, in line with current Street estimates.

The Palo Alto, California-based company posted a second quarter net income of $32.5 million or $0.08 per share, compared to $52.3 million or $0.13 per share in the earlier year period.

Non-GAAP net income for the quarter was $79.6 million or $0.20 per share, compared to $92.3 million or $0.23 per share in the prior year.

On average, 30 Analysts polled by Thomson Reuters expected the company to report earnings of $0.19 per share for the quarter. Analysts' estimates typically exclude one-time items.

Adjusted results for the quarter exclude stock-based compensation, employer payroll taxes on stock-based compensation, amortization of intangible assets, and amortization and capitalization of software.

GAAP operating income for the quarter decreased 38% to $38 million from the second quarter of last year. Non-GAAP operating income for the quarter was $96 million, a decrease of 14% from the previous year.

In the preceding first quarter, VMware's net income increased to $69.9 million or $0.18 per share from $43.1 million or $0.11 per share in the corresponding period a year back. Non-GAAP net income for the first quarter was $99.7 million or $0.25 per share, compared to $88.5 million or $0.22 per share a year earlier.
Revenues for the second quarter declined slightly to $455.7 million from $456.1 million last year. Street analysts had a consensus revenue estimate of $452.14 million for the second quarter.

License revenues for the quarter declined 20% to $228.0 million from $284.2 million a year earlier, driven by the challenging macro economic environment. Services revenues, which include software maintenance and professional services, increased 32% to $227.7 million from $171.9 million.

US revenues for the quarter declined 3% to $234 million from last year, while International revenues grew 3% to $222 million.

Paul Maritz, president and chief executive officer of Vmware said, " In addition to achieving solid financial results in the quarter, we were able to successfully complete the shipment of VMware vSphere 4, to a good reception from customers."

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