UPDATE 4-VMware sees 1st-qtr revenue below Wall St view

* Q4 non-GAAP EPS 36 cents beats Wall Street view 26 cents

* Q1 forecast revenue $475 mln misses Wall St's $495 mln

* Gives no 2009 outlook due to uncertainty

* Shares down 3.6 pct in after-hours trading
(Adds comments from CEO interview, updates shares)

By Jim Finkle

BOSTON, Jan 26 (Reuters) - Business software maker VMware Inc
(VMW.N) forecast current-quarter revenue to be below Wall Street
expectations, as the weakening economy and increased competition
hurt growth.

The company, whose shares fell 2 percent in after-hours
trading, reported fourth-quarter results that were above market
expectations.

VMware, which makes virtualization software for managing
computer networks, also declined to give a full-year outlook,
citing the uncertain global economy.

Chief Executive Paul Maritz said many of VMware's customers
have yet to set their technology budgets for 2009 because business
conditions are deteriorating so quickly.

"The challenge here is visibility," he said on a conference
call. "We have never seen this level of uncertainty before."

He said that he hopes that his ability to forecast revenue
will improve during the course of the year, but that it is
possible that may not happen.

VMware, majority-owned by EMC Corp (EMC.N), said it expects
first-quarter revenue to drop 8 percent from the fourth quarter to
$475 million. That projection was below the average analyst
forecast for $495 million, according to Reuters Estimates.

"All the indications we have are that the first quarter is
going to be a quarter of indecision," Maritz said. "We've taken a
conservative stance on the quarter and the year as a whole."

Pacific Growth Equities analyst Kaushik Roy said that as the
economy soured over the past few months, some analysts had
neglected to cut their forecasts for first-quarter revenue.

So VMware shares did not take a big hit on the outlook because
some investors had felt that the average Wall Street forecast was
unrealistically high, he said.

"The $475 million number wasn't so bad. I would say it is
better than what many on the buyside were expecting," Roy said.

VMware's software allows a single server to act like many
"virtual" machines, simultaneously running multiple operating
systems and programs.

It was the leading company in the virtualization market,
winning the vast majority of sales at the time of its initial
public offering in August 2007. Now it faces competition from
lower-cost products that Microsoft Corp (MSFT.O) and Citrix
Systems Inc (CTXS.O) have introduced over the past two years.

VMware said fourth-quarter net income rose to $111 million, or
29 cents per share, from $78 million, or 19 cents, a year earlier.
Profit excluding items was 36 cents, above the 26-cent average
forecast, according to Reuters Estimates.

Fourth-quarter revenue grew 25 percent to $515 million,
slightly beating the average analyst forecast of $512 million.

"We delivered good performance in the fourth quarter in very
challenging economic times," Maritz said.

Shares of the Palo Alto, California-based company fell to
$21.65 after-hours, down 2 percent from their close at $22.10 on
the New York Stock Exchange.

VMware's stock has proven to be a big disappointment for
shareholders in the last 12 months, after debuting at $29 in
August 2007 and reaching a high of $125.25 in October 2007. It has
dropped about 72 percent over the past year, about double the
decline in the Nasdaq Composite Index .IXIC.

The company plans to launch several key products this year,
Maritz said. They include VMware's next-generation version of its
flagship product, VMware Infrastructure software, as well as
programs for building and managing virtual personal computers and
cloud computing systems.

He said that their development is meeting internal targets,
but declined to specify when in 2009 those products will be
released.

(Reporting by Jim Finkle and Tiffany Wu; editing by Carol
Bishopric, Tim Dobbyn and Matthew Lewis)