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VMware : So what will Virtualization fetch?

This nice article at SeekingAlpha. A good summary of how to survive as a Billion dollar company

When distributed transactions hit the mainstream, BEA was there. As transactions expanded into JAVA application servers, BEA shifted too. But the underlying technology had been around for a long time, in some cases 20 years, before being broadly adopted. And even BEA stalled out at $1B in revenues. So, is virtualization set to push a company like VMware into a sustained growth market above $1B in revenues? Thanks to the recent S1 filing we can all see that:

# VMware reached $704M in revenues for 2006.
# Its growth trajectory suggests revenue estimates just above $1B for this calendar year.
# Operating expenses grew rapidly last year, up 100% vs. the 80% revenue increase.

Using some simple back of the envelope figures we’re guessing the stock will trade off of a 50c earnings number and could enjoy a 40x P/E multiple. That means a $20 stock drives a $6.6B market capitalization, and if that scenario plays out EMC will have a nice 10x return on investment over just three years. Still, investors should be concerned over what their equity stake is really buying.

Original stuff is here.


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