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VMWare is dead, which affects EMC somewhat



January 28, 2009 – Comments (5) | RELATED TICKERS: VMW , EMC

OK, I am exaggerating somewhat. VMWare is still very much alive. However, the economic crisis came at precisely the wrong moment for the company. Had it been in its present position in 2004, it would have taken off, captured significant market share and built a lasting advantage over competitors. However, companies are scaling back their tech spending on all fronts.

Additionally, VMWare's competitors are catching up. The company's lead in virtual server technology is not unassailable. While VMW is ahead, three competitors currently have free technologies out and are catching up to VMW's products. Microsoft in particular, despite its overall absence of corporate focus, has a huge budget (as well as the fact that it is, or should think of itself as, a software company). 

VMW's stated intent to expand into virtual data centers as the next phase of growth seem to me to be an implicit admission that its competitors will catch up.  However, I question whether they can establish any sort of advantage in this field. Indeed, Citrix already has virtual desktop products in this area. 

The bottom line is that I do not see VMW being able to stake out a moat. The increased competition in its core fields will mean that it basically becomes a commodity producer.

Now, EMC. Storage spending doesn't seem to be declining as fast as everything else. A recent TMF article (Do the Safety Dance with EMC) says that it's "a deep-discount value stock that derives much of its actual value from a high-growth subsidiary." I agree that EMC is a value buy at this point, even if VMW's prospects are diminished.

5 Comments – Post Your Own

#1) On January 28, 2009 at 4:31 PM, capsoregime (71.57) wrote:

Have you ever used the opponents techonologies?  VMW is far superior, and in enterprise -- where it counts -- Hypervisor, et. al., are not going to cut it. 

 FWIW, the "free technologies" from other companies you are talking about are in competition with free technology from VMW.  Their plan has never been to profit from that portion of the market (c.f. VMPlayer, VMServer, etc.).

 I agree VMW became horribly overpriced, but I highly doubt VMWare is going anywhere. 


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#2) On January 28, 2009 at 11:06 PM, ajm101 (32.27) wrote:

Yeah, I have the same question as capsoregime.  I sincerely doubt that you work with the technology based on your post.

VMWare is to virtualization as Apple is to portable music players.


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#3) On January 29, 2009 at 5:48 PM, dirkness (62.51) wrote:

Ditto the above comments.

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#4) On January 30, 2009 at 12:08 AM, rajhsri (< 20) wrote:

Mr. weiwentg,

If you haven't looked at Q4 results of VMware, I recommend you to have a look at it and then compare the results with Mr.softy/Citrix.

Soon after, you'll realize who is going to be a long term player.

Coming to free products, VMware free products are far far better than those of Mr. softys/citrixs free products.

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#5) On January 30, 2009 at 10:02 AM, yulmanagain (< 20) wrote:

I wouldn't a dime on any of VMWare's competitor.

Sun with the extremely buggy VirtualBox has been surpased in assets capitalisation by Red Hat in 2008. If any of the Virtualisation player is to go out of the market it's Sun.

Plus, I think economic crisis will actually help VMW, non-techie financial people will get easaly hypnotised by VMWare propaganda-like statement that it cut costs and have an incredible ROI.

 Dispite very high financing MS Hyper-V still has a major need the Windows 2008 DataCenter version to run more than 1 Virtual machine. That's still much more out of price compared to VMWare.

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