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VMware, Inc. Message Board

  • proft_guide proft_guide Jan 28, 2008 11:37 PM Flag

    this is rediculus

    We all understand about missing guidance set by the market, BUT, this company is growing by 40% to 50%,that is amazing by ANY STANDARD.
    If you can find other companies growing PROFIT by that IN THIS KIND OF MARKET you will have a very short list and THEY ALL DESERVE THE PREMIUM PRICE YOU WILL PAY. Please make a list of companies who can show SO CALLED DECELERATION from 80% to 50%, I am sure it will be short (spare us all by NOT LISTING companies with small to mid caps-- they can't compete with VMV--so don't post stupid little companies)

    I read the whole transcript and NO WHERE DOES IT STATE THAT THEY ARE FEELING PRICING PRESSURE OR ANY OTHER KIND OF PRESSURE FROM COMPETITION. It DOES state, they have been able to keep their prices and margins.

    As for the revenue that will be stronger in the first half of the year compared to next years last quarter; that is only because of revenue that will be coming in from THE LAST QUARTER-- deferred payment that will show up in this quarter--- this is clearly stated!! So, its just going to look like they brought in more revenue in the first half of the year.

    This stock was and IS not priced to perfection - particularly in a market when growth at this rate is hard to find, let alone SUSTAIN like this company has shown. 40% to 50% growth is hard in ANY envirenment!!!

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    • Lets do it in a layman's language:

      Lets say VMW revs were $100 for 2007. And additional $50 in deferred revenues. They are predicting 50% growth in Revs for 2008. That would pin 2008 revenues to be $150.

      Now out of the $50 growth, VMW CFO said 20%-30% will be rolled in from 2007 deferred revenues. And plus the 2008 year's Service portion of the revenues which is usually at 40%. So out of $50 growth, approx $35 will be contributed by SERVICE and only $15 from LICENSE.

      That is what the Analyst was trying to pin the CFO but he backed down and said they will not break that. But we all know why !

    • yes exactly what I am trying to say - Again for a growing S/W company, LICENSE GROWTH is ALL THAT MATTERS.

      And in case of VMW, the analyst tried to confirm the Math that 70% is service growth and 30% is from NEW License and the CFO somewhat accepted the theory but declined to break the two in the Guidance.

      What part you do not understand !? Maybe tomorrow you will.

    • Dear, first of all, you cannot call VMW numbers "sustained". it is a brand new public company with only 2Q of history.

      Second, everything has a fair value, no matter how good the company or product is. $40 Billion for a company yet to report a full billion dollar annual revenues (before today) was/is simply NOT SUSTAINABLE.

      And most important: VMW did guide for 50% rev growth but that included deferred SERVICE revenues. And based on that, it looks like VMW will only have 30% in license growth (read the transcript or my other post). For a GROWTH s/w company, license revenues is what DEFINES GROWTH.

      SO NO WAY, ANYBODY WOULD WANT TO PAY 30-40x SALES for a company growing just 30%. EVEN for a company growing 100%, 30x-40x SALES is RIDICULOUS, COZ IT (100% growth) IS SIMPLY NOT SUSTAINABLE. And in case of VMW, it came to light in just 2Q of operation as a public company.

      If you want to look at similar growth companies AND CHEAP look no further than GOOG AND AAPL.

      VMW at $61 is STILL VERY EXPENSIVE. With just 30% license growth, you can only give it 4-6 SALES multiple and that would be around $6-$7 billion. That would equate to VMW around $18-20 tops.

      • 1 Reply to jamiejz
      • I don't know what you are reading, but if you read the transcripts "look in yahoo headlines". VMW is good enough to give you comparisons all the way back to 2006, this starts through out the first couple pages of the transcripts. We know they were not public then, but it is good business of them to show you clarity and if you look at the numbers you will see "SUSTAINED" growth all the way back to their private days up to the present NOT JUST FROM THE IPO.

        Next ---- go to page 4 of the transcripts where MR. MEEK makes the statement of 50% revenue growth.

        So I'm not sure what you saw, but its very clearly stated.

    • VMW's PE and PEG ratios are too high in a bear market, and then comes the competitions...

      there are lots of good growth stocks out there with significant lower ratios.

    • the answer is simple 40-50% of what? No one knows the value of the virtual marketplace. Example - Microsoft had a great quarter and the price of their stock goes down because they participate in a very mature market which has a much more definable market size. When it comes to "growth" stocks, you just don't know what is out there. I am not arguing that this is not a great company, but until this market becomes more defined, the stock price will not make any sense and will be volatile.

    • BEAR MARKET...very simple. Stocks go down in bear markets, especially when they are so very optimisticly priced. 3 out 4 stocks will fall. No matter what you think or will believe.

 
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