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# VMware, Inc. Message Board

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• ritesh0100 ritesh0100 Oct 24, 2007 7:55 PM Flag

## EMC + VMW = \$90 billion - The math: \$70 billion increase in total Market Cap in less than 180 days

Dumb ass, your EMC valuation...(\$48 billion EMC + \$42 billion VMW)...is off by 36.2B using your own math...EMC valuation according to your numbers is (48B - .86(42B)) = 11.88B. This is because EMC owns 86% of VMW, hence if VMW is 42B, then 86% of 42B is 36.12B, which is EMC's stake. Therefor your 48B valuation of EMC is (11.88B EMC + 36.12B VMW)

People need to get there facts straight before posting on this board. You guys jump to conclusions before reading the facts. So many said they only beat by 1 cent, when in actual they beat by 6 cents since someone people don't understand non-gaap earnings.

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• WTF are you talking about the Math being wrong here. And you call me dumb. Again for idiots like you in simple English:

Before VMW IPO: EMC's was one company with market cap (incl. VMWare and other Products) of \$20 billion.

Now we have 2 companies each having market cap of \$48 billion and \$42 billion for a combined market cap of \$90billion.

EMC's market cap doubled to \$48 billion because it's share priced doubled to \$22+. So just EMC's outstanding shares will fetch \$48billion. And on top of it EMC's has 90% VMW share which will fetch it another \$35 billion or so.

So you could argue EMC is worth (\$48 billion + \$35 billion (90% VMW) and VMW is worth \$5 billion.

But the reality remains that both companies combined command a market cap of \$90 billion as compared to EMC which had a market cap of \$20billion before VM IPO.

---------

If you still do not get it, try this:

If EMC were to slowly but surely sell its 90% stake for \$100 a share to MS or some entity, EMC will get close to \$35 billion for it. What do you think will happen to EMC's market cap ? According to you stupid, it will stay the same.

In fact it will theoretically go up to nearly (48 + 35) billion. And that is exactly my point.

Over and out. Good luck to you longs. Merry away like they did with SUNW when they announced JAVA or when PALM (traded as high as \$150 I believe, currently trading at \$15) broke off from 3Com.

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And by the way, I know ESX has an Embedded OS. What I meant to say was even with an Embedded OS, (surprisingly) the performance degradation is still apparent. And not just 8-10%, it is to the tune of 20%-30% if you account both CPU and network through-put especially on Linux VMs.

Here is what VM support has to say on it:
------------------------

"Poor networking performance has been observed in virtual machines with SLES 9/10 Linux guests, but other versions of Linux guests based on the 2.6 kernel may also cause this behaviour.

This problem hasn't occurred in virtual machines with RHEL 4, but it could occur if certain non-default driver functions are enabled."

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This is not a lie. I have the email from VM Support to back me up.

And somebody said, they P2V'd 3 racks of Sun Hardware to one Qaud Opteron on VM. You got to be kidding me and that too in Production and drove it back in a Car. What are you talking about ?

You may make money in the near term if the stupid market keeps up with the charade and ignore the recession threats so blatantly. But in the long run (jan-mar'08), you will remember me.

Over and out.
-j

• 3 Replies to jamiejz
• Jamie you're indeed dumb because you still can't understand the double-counting of VMW market cap. Let me give you an example to help you.

Let's say we have company X which is worth 10B, and company Y which has 5B of cash and nothing else (therefore it's market cap is 5B). Now Y reaches an agreement with X in which Y puts its 5B cash into X, in exchange for 1/3 of the combined company, let's call it X2. X2's fair market value should be 15B because it just gets an extra 5B of cash, and Y's 1/3 stake is worth exactly 5B. Y's market cap remains 5B. So there is no change in any share price in this transaction.

Now using your math, post transaction, X2+Y = 20B, a net increase of 5B from X+Y. Did anyone inflation share price to create an extra 5B of market cap? Nope. The only problem is that your math is wrong because it double counts the 5B value that Y owns in X2.

Get it? if you still don't get it, I'll give up and call you dumberer.

• Hi jamiez

what ritesh said is correct. VMW market cap is about 40B.. But EMC's market cap also includes 86% of 40B . Even if EMC sells its share of VMW it will still have a market cap of 47B.. Why do u think the valuation of EMC will not take into account the 86% share of VMW.

Its a different story that VMW value has grown tremondosuly after the spinoff..

However I like ur evaluation of the stock. It is very puzzling that the how a company's value can change from about (25\$/shr)10B to (100\$/shr)40B in a couple of months..

-Praveen

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