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VMware, Inc. Message Board

  • jamiejz jamiejz Oct 24, 2007 7:37 PM Flag

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

    Longs, dare to refute any of my below observations:

    As a consultant, I have used this technology for the last 6 years (since 2001) and maybe 3-5% of my customers have adopted it in Production. Rest all of them have either used it for Test labs (free version) or plan to use it for DR (like my current company). And for the last 2 years, Xen has really picked up speed in the Open Source world (RedHat and Suse Linux now comes integrated with XEN) and SMBs which rely on free software. Or they can use the free VMWare Server.

    2 Main Reasons for poor adaptation in Production:
    1. Speed: You have 4 physical servers which are 25% utilized. You would think, you can put all 4 or even 3 on one VM and you will get the same performance. Think again. There is a very noticeable degradation in CPU and network through-puts when running under VM (even with their ESX version which surprisingly (according to VMWare) runs an embeded OS. So it does not have to sit on top of another OS.

    2. Cost: VM Enterprise is very VERY expensive. In our case, it equates to the cost of one Blade server. So you think you save on Hardware, you end up spending on the license, plus you will need 1-2 VM experts on your pay-roll.

    So, do not get me wrong, I have recommended VMWare and similar VM products to many of my friends for their home desktops or laptops. But I will never recommend buying VMWare stock at such lofty levels. Not at $100, not even at $50, maybe at $25.

    Mark my words, there is not much growth left for VMWare especially with so many free products already available. Corporations have realized that there is no cost advantage either. In fact you get performance degradation for the added cost.

    Imagine the company EMC which had a market cap of around $20 billion just 6 months back (trading at $12), is now worth $90 billion ($48 billion EMC + $42 billion VMW) on back of what ? A product which will have around $250 mil in 2007 profits and mounting competition.

    So the math is: $70 billion increase in total Market Cap for $150 mil in additional profits (VMW was already making money while part of EMC).

    And you foolish longs expect it go higher and keep going higher? And that too when the country is almost in a recession. Go for it !

    Needless to say, I own Jan and Apr'08 85/90 puts and will buy more if it continues upward.

    From $20billion to $90 billion in less than 180 days. Like somebody had said about VMW being the biggest Casino stock ever to be played in the US markets.

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