VMware third-quarter profit dropped by more than half as the company invested more heavily in research and development, the company has reported.

Net profit for the quarter ending 30 September was $38 million (£23 million), down from $83 million (£50 million) in the third quarter of 2008, VMware said.

Revenue for the quarter was $490 million, up from $472 million for the same period last year. Analysts had been expecting $474 million in revenue, Thomson Reuters said.

The economy remains challenging but VMware now has better visibility into the coming quarters, Chief Financial Officer Mark Peek said in a statement. He forecast fourth-quarter revenue of $540 million to $560 million, ahead of current estimates, but said revenue in the first quarter next year is likely to be down sequentially.

VMware spent $133.5 million on R&D during the quarter, up from $85 million in the same period last year in a bid to defend its position in the virtualisation space. Sales and marketing expenses also climbed, as the company continued to promote a new version of its virtualisation software, vSphere 4.

"Our solid third-quarter results were driven by strength in the US federal sector, increased transaction volumes and particularly robust growth in our maintenance renewals," Peek said in the statement.

A 1 percent drop in revenue from the US was more than offset by a nine per cent increase in sales elsewhere in the world, VMware said. Services revenue, which includes maintenance fees and professional services, climbed 33 percent to $249 million, while revenue from new software licenses declined 16 percent to $240 million.