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VMware no more Wall Streets darling

But the love-fest was short-lived.

Microsoft (MSFT) has entered the race with lower-cost virtualization software, and while it is still only in beta, the threat of the Redmond, Wash.-based software giant sent shudders through most investors when the company starting pounding the table on virtualization in late January.

This has made VMware look -- to some -- like the next Netscape, another innovative Silicon Valley software maker that briefly ruled its market before getting crushed by Microsoft.

The market already seems to have voted. VMware's stock, which debuted at $29 a share in August, soared past the $125 mark by late October. The shares then sharply reversed -- no doubt helped by a general downturn in technology stocks - - and have since sunk back below the $50 mark. The stock closed at $51 on the day of its IPO.

"Maybe VMware has a very strong product offering today, but the question investors are struggling with is, for how long can VMware continue to have a technology lead," said Trip Chowdhry, an analyst with Global Equities Research.

Chowdhry made a sharp call on VMware, slashing his price target from $60 to $ 29 a share on Jan. 22 -- one week before the company posted a disappointing earnings report that sent the shares tumbling almost 34% in a single day.

We all know that Trip is pretty critical on VMware. I don't expect neither hope that VMware ends up like Netscape. They have worked and provided a great software. I still remember fondly reading an old 2001 Brown's Analyst paper which start as "VMware: A tool for..." , since then its grown into a huge firm and massive offerings.

We are in a very hard market, there are lots of opportunities and VMware can still squeeze a lot out of the data centers and put back a lot more value in that very data center.

And surely we should not forget Microsoft, neither should we ignore those "in-the-stealth-mode" under the shadows growing firms like Virtual Iron, Parallels etc. Citrix will gain a considerable market share when it comes to desktop/application virtualization, so will Microsoft.

I liked what Susannah, VP @ ClearCube said it clearly: "Microsoft owns the desktop". But having said that I also believe that the pie is getting bigger and there is enough for all of them to feed upon. And I also know that when a firm like Microsoft goes to dinner, they will devour anything in sight.

So the danger lurks and there is opportunity. That is what its all about. It's a simple game of who eventually ends up playing the role of the "hunted". We honestly don't want that to happen but we also realize that utopia is something we will never achieve.

Here's the CNN article.


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