Virtualization pioneer VMware (NYSE: VMW) is usually a happenin' place to be. Whether it's good news steeped in growthand innovationor bad tidings of doggedly determined competitionfrom Microsoft (Nasdaq: MSFT) and Oracle (Nasdaq: ORCL), this company is never boring.

Until today, that is.

VMware's third quarter was a relative yawner. Sales rose 4% year-over-year to $490 million and pro formaearnings stayed flat at $0.24 per share. In this economic environment, I guess that qualifies as a smashing success -- we're comparing a pre-meltdown quarter to a post-apocalypticperiod, after all.

But for VMware, it's no more than you'd expect. The annual VMworld conferencecame and went without any earth-shaking announcements, despite a slate of top-notch partners like Cisco Systems (Nasdaq: CSCO), Intel (Nasdaq: INTC), and IBM (NYSE: IBM).

New products are often a cause for celebration or calamity, but CEO Paul Maritz is feeling mellow about the recently released vSphereproduct suite: "I think we've been at pains to point out that vSphere is not going to be a big bang," he told analysts in the earnings call. "This has to go through the stages of adoption. The effect will be felt over several quarters." And CFO Mark Peek expects his business to return to seasonal patterns, including a slight sales drop between the fourth and first quarters. Yawn, again.

Perhaps the most exciting news in this release was that service revenue outgrew the rest of the business with a 33% annual uptick to $250 million. It's a good sign of underlying strength in VMware's business model as customers lock in to long-term service contracts even if they don't buy a whole lot of new software licenses.

So VMware is going through a quiet stage in its growth at the moment. Management complained that customers are hesitant to sign big and truly long-term contracts at the moment, opting instead for smaller and shorter ones. The way Intel and Advanced Micro Devices (NYSE: AMD) keep putting more processor coresinside every processor is another muting factor, because customers generally pay support fees based on the number of processors running VMware's software -- not the number of cores. One four-core chip and four single-cores may do roughly the same work, but the quad-core solution cuts your support costs by 75%.

The IT industry is changing. VMware helped instigate some of the changes and needs to adjust to all of them. Sooner or later, the multi-year contracts will start to roll in as IT directors become comfortable making long-term plans again -- and their budgets get refreshed. For now, VMware shareholders can enjoy the 150% bounce off last November's 52-week lows and wait for the next catalystto come along.

The show must go on.

This article was originally published as What a Yawner, VMware!on Fool.com

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