VMware Jumps on Analyst Comment Tuesday August 21, 2:57 pm ET VMware Up After Analyst Predicts Virtualization Software Technology Will Be Popular
NEW YORK (AP) -- Shares of VMware Inc. rose to a new high Tuesday after an analyst said the software maker has a large technological lead on its competitors, and predicted the company's revenue will keep growing over the next few years. ADVERTISEMENT
Robert W. Baird & Co. analyst Daniel Renouard began covering VMware with a "Neutral" rating and a price target of $60. The stock quickly climbed past that mark and set a high of $66.59.
VMware stock began trading on Aug. 14, and had ranged between $48 and $61.49.
Renouard credited VMware with inventing server virtualization software, which allows businesses to run multiple applications and operating systems on one server. As a result, they can use fewer servers and less power, and better manage the data in the system.
The market for server virtualization software is young and should expand quickly over the next few years, the analyst said. He said VMware holds 85 percent to 90 percent of the market now, and could control a majority of the market even after competitors close the gap.
Some of Renouard's industry contacts were far more optimistic. He said they suggested VMware software should be on "90 percent of all servers."
For now, he said, the company's products are at least 18 months ahead of the nearest competition, a free product from Microsoft Corp. Other companies are struggling to attract users.
"VMware offers a multitude of product offerings and features, and has seen such rapid growth due to a large first-mover advantage over competitors," he said. "In total, we believe market growth supports continued rapid expansion of VMware revenues for the next several years."
Shares gained $9, or 15.7 percent, to $66.33 in afternoon trading.