Virtualization Technology News and Information
VMware Building 'Virtual' Lead Before Microsoft Gets Untracked

Hot IPO VMware (VMW) has only gotten stronger, thanks to its latest product, as it awaits the arrival of its first major challenger — a company called Microsoft. (MSFT)


Some analysts have a 100 or more price target on the stock. One reason is that VMware, which already dominates its field, last month paved the way for even faster growth. It announced that it now will embed its core product on servers before they ship to customers. Major server makers have said they plan to make hardware with VMware software pre-installed.

This adds up to a big challenge for Microsoft, which has low-end virtualization software out there but won't launch a product to challenge VMware's high-end core product until next year.

"VMware company has great potential," said Shebly Seyrafi, an analyst with Caris & Co., who last month raised his price target from 60 to 90.

But the stock's huge initial run-up has some analysts cautious.

Of seven analysts announcing in September that they had picked up coverage of VMware, three had neutral or equivalent ratings, according to One analyst who already was covering the company, Walter Pritchard of Cowen & Co., said in a note Sept. 17 that the stock's fair value was in the 50s.


As for Microsoft, it aims to unveil its first major-league hypervisor in late 2008.

By releasing an embedded hypervisor, VMware becomes a tougher rival for Microsoft, says Tom Bittman, an analyst with research firm Gartner.

At the same time, he says Microsoft's entry will help the virtualization market grow. The product has penetrated only 6% of its market, Bittman says.

"This is a huge market opportunity," he said. "You want to be fighting Microsoft on equal footing."

The new embedded product also could increase sales of VMware's management tools, Bittman says. He says 80% of the customers who use the hypervisor also use the company's management tools.

Those tools are key to the company's longer-term growth.

Bittman says VMware, with its management tools and virtualization software, can challenge Microsoft with products that act sort of as an operating system. That could make Microsoft's traditional operating system and related software unnecessary.

"I'd call VMware a bigger threat to Microsoft than Google, (GOOG) " Bittman said.

Read the entire article from Investors Business Daily, here.

Published Wednesday, October 03, 2007 10:19 PM by David Marshall
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