VMware (NYSE:VMW)

CAPS Rating: 4 out of 5

VMware is a leader in software for virtual computing, allowing companies to integrate and manage their cloud infrastructure.

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Player Avatar lamontcg (< 20) Submitted: 6/27/2010 9:44:27 PM : Underperform Start Price: $67.57 VMW Score: +57.75

VMware's virtualization business model is to sell other businesses on reducing their server footprint and then taking the cost savings and giving it entirely over to VMware. Sooner or later IT managers are going to wake up and wonder where all the cost savings that virtualization was supposed to achieve is going. Xen is going to undercut VMware in the cost-conscious Enterprise-class market, at about 20% of the cost given the feature set.Meanwhile, virtualization features are being pushed into the operating systems. Microsoft's Hyper-V and Linux KVM are going to undercut both Xen and VMware in more highly cost conscious datacenters. The Enterprise feature set isn't there yet, but give it a few years and KVM will have memory overcommit, live migration, high availability failover and the ability to script dynamic workloads and lab management, and integration with SANs and LUN provisioning. Why would anyone need to pay even for Xen at that point, not to mention paying the obscene licensing fees for VMware?Everyone in the business world is worried that some 800 lbs gorilla like NetAPP or EMC is going to start competing with VMware, but virtualization technology is not rocket science and as it gets pushed into the mainline Linux kernel that will cut VMware's legs out from under it. Since VMware is a single play on virtualization and isn't diversified, when virtualization becomes commoditized that will destroy VMware's entire business model. The same thing happened with Linux and old Commercial Unix operating systems like IRIX and Digital Unix.

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Member Avatar FreeMortal (29.41) Submitted: 7/24/2010 4:07:02 PM
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VMware has the lion share of a vastly expanding pie. Their sales have been growing at a rapid pace for years. You mention that Citrix and Microsoft will develop comparable features to VMware in a few years. Of this I have no doubt, however over the last decade VMWare has been the trailblazer in virtualization and has kept several steps ahead of the competition. Live migration is huge! Along with better memory and bandwidth sharing, it allows IT managers to treat hardware and infrastructure more as a "computing power" commodity, either in-house or the cloud.

Virtualization by itself isn't even close to being a commodity because the capabilities and features of different platforms vary considerably and they are continuously evolving (with VMware way ahead). However, virtualization will CREATE commodities out of various aspect of computing power (hardware, software, memory, storage).

I rather like the fact the VMware is focused on virtualization not diversified. They do not do everything, but they do what they do better than everyone else. I believe that sticking to its core services is what has kept them ahead of the pack all these years. The virtualiztion market is not even close to saturation, which is why this focused company will continue to outperform.

Member Avatar mytworupees (95.46) Submitted: 7/30/2010 9:17:47 PM
Recs: 2

The biggest leap VMware made is that, they brought to their Virtualization software (In my opinion OS in disguise) cloud computing features. No other OS today has that capacity. Amazon, Google are not interested in private clouds that big enterprises want. The fact is Microsoft is already late. Just like how Microsoft Windows OS got the first movers advantage, VMware will have that advantage for years to come. Any way nobody thinks that companies will last for ever. Right now it is the VMware's time. There was a time when Microsoft had is day. In future, may be Linux again gain. Who knows. Right now right the VMware wave and make some money. When the VMware wave seems to come done we will search for the next big idea to make money. But I think such a situation will only come after few years.... If want to wait for Microsoft to come out with cloud features in the next release then good luck to you.

Member Avatar naughtyguy (33.49) Submitted: 8/5/2010 11:37:03 AM
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My nephew works for EMC and he thinks you don't have a clue!
VMware has a giant step ahead of everyone.
On the other hand, they have had a good stock price appreciation (although well deserved).
I will end my underperform if I see a 5% correction.

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