Alert: VMWare moving rapidly towards the 80-90 range as realization sets in not only about the already excessive valuation, but the fact that the product itself is not unique nor protected and is suprring intense competition as the hype surrounding VMWare highlights the profit potential. Dell just acquired EqualLogic, but other companies (not limited to just Microsoft) have dramatically stepped up investment and aquistions in recent days to take away VMWare's lead. Expect a more fair valuation that takes competition into account to leave the stock around 85 by week end, possibly drifitng lower into the 60s if competitors don't let up the investment pressure.
Correct... and what do you think of the plethora of companies who either do or will be able to do virtualization investing mass amounts of capital to compete with VMWare and take some of the profits? What does this do to your earnings projections and when tied in with your multiple, what stock price do you arrive at?
you are dreaming grasshopper. The potential for VMWare is not just their future revenues, but WHAT THEY ARE BOOKING TODAY. You apparently are ignorant of the Intel contract and the Marines contract. Do your homework before you open your mouth next time.
It will take years for competitors to secure the brand recognition and reliability of VmWare.
Stock price = present value of all future cash flows. This includes both short term (present bookings) and future. The main thing that has changed is the level of investment of companies who will be competing and taking away market share in the future. Some won't be able to do much, as they arent really in the same business, and others will be able to do a lot.
Google's earnings have little to do with VMWare's, so comparing the two stories is little more than a novelty - not a reason to buy or sell.
Short term traders may want to risk $$ on a dead cat bounce however, I would suggest a $100.00 call option late in the day (if it drops below $100, which is likely), and hope for a return to the $105 level.) With this strategy, you should get out tomorrow, even at a loss. Note that the profit potential is much larger than the potential loss (for say, a $5 further down swing), than for a $5.00 upswing.
It doesn't matter, VMWare's lead is just a blip on the radar. Combine excessive valuation, (ridiculously high P/E), with the fact that other companies want a peice of the pie and it is game over at these levels.
Not to mention the fact that VMware products are not useful to everyone... You need to be running enough servers (and a need to have them operational all the time) to justify using VMware. Furthermore, the servers you need to run must not be at full processing capacity (nor can they spike to full capacity). Its an interesting idea, (the ability to move a server from one physical machine to another is great for maintenance), but lets ask ourselves... WHY HAVEN'T MORE COMPANIES BOUGHT VMWares products yet?!?! Do they not know about them? Surely, if they are going to save SOOOO much on hardware, then they would have bought it already... Oops, they already DID.
You can't justify VMware being at this price, not now, not in the near future. (I do not hold ANY position in VMware, so this is an unbiased opinion.)
I actually think he is correct. The issue isnt the difference between EqualLogic and VMWare - there are many. The issue is that the competition investment is heating up and it is becoming clear that VMWare will not have the corner on the market they have now in a couple of years.
I was in at 62 and I just sold at 104 (luckily took advantage of the temporary bounce off of 102... Im pretty sure it will be below 100 in a couple of hours). I'm seeing the same thing you are talking about elsewhere... increased realization that the competition is coming on hard and fast. Good company, but has a tough road ahead facing the giants who are now stepping up their investments.