VMware may report its first ever drop in revenue in the next quarter, it said, adding that sales are being hit by the recession.

Revenue for the quarter to 31 March was $470 million (£323 million), up seven per cent from the same quarter last year but a fraction below what analysts had predicted, according to Thomson Reuters.

License revenue declined 13 per cent from a year ago, to $257 million, as customers reduced their IT spending during the recession, VMware said. The drop was offset by a 48 per cent jump in service revenue, which is becoming a larger part of VMware's business.

Net income for the quarter was $69.9 million, up from $43.1 million in the first quarter of 2008. Excluding one-time charges, the earnings were $0.25 per share, up from $0.22 a year earlier. That beat the estimates of financial analysts, who had forecast a 10 per cent drop in earnings, to $0.20 per share.

The tough economic climate, combined with the transition to a new version of VMware's core software that was announced on Tuesday, will depress the company's sales in the current quarter, CFO Mark Peek said in a statement.

"As a result, we expect our second-quarter revenues will be flat, or even down, compared to the second quarter of 2008,” he said.

That would be a first for VMware, which has seen its revenue climb every quarter since it went public two years ago. The growth has been slowing, however, as VMware grows larger and the initial wave of virtualisation adoption starts to slow.

Chief executive Paul Maritz called the first-quarter results "solid" given the challenging climate.