Virtualization software specialist VMware (VMW) reported a solid Q3 on Monday night, boosted by strong growth in new enterprise license agreements (ELA), including the biggest deal in its history -- with the US Army.

Shares in the pre-market were up 10% this morning.

The US Army deal is notable because a slowdown in government spending has been hanging over many large networking technology providers, including VMware and others such as Cisco (CSCO), Juniper Networks (JNPR), and Riverbed Networks (RVBD). Perhaps the VMware deal indicates these companies will benefit once the uncertainty over the federal budget can be resolved.

Many networking software and hardware makers have large portions of their revenue attributable to government business, because of all the gear that goes into those massive government networks.

At any rate, VMware reported third quarter revenues of $1.29 billion, an increase of 14% from the same period in the prior year. Operating income for the third quarter was $287 million, an increase of 51% from the third quarter of 2012.

Net income for the third quarter came in at $261 million, or $0.60 per diluted share, up 67% per diluted share compared to $157 million, or $0.36 per diluted share, for the third quarter of 2012.

Company executives attributed the growth to strong licensing growth.

Carl Eschenbach, VMware President and Chief Operating Officer (COO), pointed out that the company closed five deals above $10 million and that 33% of total Q3 bookings were ELAs. He said that the quarter included VMware’s second highest in quarter renewal rate for ELAs. In addition, sales of VMware's vCloud Suite sales exceeded internal plans, said Eschenbach.

VMware did lower the upper end of its full-year revenue forecast range to $5.21 billion from $5.26 billion.

Despite this, the overall numbers weren't bad at all and the market reaction may indicate investors are looking for a reason to buy. Since January of 2011, VWare's shares have mostly chopped sideways-to-down between $80 and $120 after a meteoric rise between 2009 and 2011 in which shares quadrupled. This morning they are trading around $92 with a 52-week low of $65.

The company has a raft of new products coming online, include the new storage and sofware-defined data center products introduced at its global tradeshow, VMWorld, in August.

That's why, as I'm disclosing, I recently bought it. I'm convinced that shares have been depressed by the slowdown in government spending and budget issues and they may now be boosted by new product releases.

(Disclosure: Long VMware)