Skip to main content

Is VMware's valuation sustainable?

Sacconaghi notes that in a majority of cases, the stocks underperformed in both the quarter and the year following the time at which they reached the 20x trailing sales level.

Sacconaghi notes that only two stocks - XM and its rival and potential merger partner Sirius - were able to maintain a multiple that high for a year or more; of course, again, both stocks subsequently traded sharply lower.

Sacconaghi is not making a fundamental call here on VMW; he’s just saying that the valuation has reached a level that other high-fliers have not been able to sustain. The irony is, Sacconaghi did this assessment in connection of his coverage of EMC, which he continues to rate Outperform. Sacconaghi says that if you give EMC full credit for the value of its VMW stake, then core EMC is worth just $5.50 a share, which gives it a P/E of about 7.6X 2008 estimates EPS, or a 50% discount to the market; he says EMC deserves about a 10% premium to the market, which implies investors are discounting the value of EMC’s VMW stake by about 47%.

Simple question: What about the high performing stocks that kept performing higher and kept selling even after that 2002-2006 era? Should VMware necessarily be on the falling side. I must tell you so far there has been a lot of noise but expect some real good open source initiatives like Xen, KVM, there isn't one proprietary vendor that is really challenging VMware. Sure, this may change, but right now it still looks like it looked half a year ago. Microsoft's virtualization product is slated to hit the market in Aug 2008 (If all goes well and no delays are experienced), Citrix is warming up but is faced with the challenges of integration. It will go down but it won't fall as abruptly as it rose.



Popular posts from this blog

Get Vyatta Virtual Appliance, now VMware certified!

We all know Vyatta, don't we?

Vyatta, the leader in Linux-based networking, today announced that its open-source networking software has received VMware Virtual Appliance Certification, thereby providing customers with a solution that has been optimized for a production-ready VMware environment. The company also announced it has joined the VMware Technology Alliance Partner (TAP) Program. As a member of TAP, Vyatta will offer its solutions via the TAP program website. With the Vyatta virtual appliance for VMware environments, organizations can now include Vyatta’s router, firewall and VPN functions as part of their virtualized infrastructure.

Vyatta combines enterprise-class routing and security capabilities into an integrated, reliable and commercially supported software solution, delivering twice the performance of proprietary network solutions at half the price. Running Vyatta software as virtual appliances gives customers many more options for scaling their data centers and cons…

3PAR adds native LDAP support to simplify administration

3PAR®, the leading global provider of utility storage, announced today native support for lightweight directory access protocol (LDAP). Support for LDAP enables centralized user authentication and authorization using a standard protocol for managing access to IT resources. With 3PAR’s support for LDAP, customers are able to now integrate 3PAR Utility Storage--a simple, cost-efficient, and massively scalable storage platform—with standard, open enterprise directory services. The result is simplified security administration with centralized access control and identity management.

“3PAR Utility Storage already provides us with a reliable, shared, and easy-to-use consolidated storage platform,” said Burzin Engineer, Vice President of Infrastructure Services at Shopzilla. "Now, with 3PAR support for LDAP, managing security commonly--across all our resources, including storage--is also simple and efficient.”

Press Release

DeepLearningTrucker Part 1