"may be true about how much of the data center is virtualized, virtualization may occur as older servers are replaced, not by retrofit"
I'm not at all speaking to the price of the stock. The market will decide this. I'm only commenting on this statement, which is totally incorrect based on the way the product is sold & actually how many companies I've seen [including mine] are making the transition.
Capacity planning is based on expansion and the companies I see are making a capital expenditure based on 3-4 years out [expansion planning]. Investment is not being made "as old servers are replaced", rather freeing themselves of the maintenance overhead [costs & time] of all old servers via P to V [physical to virtual] conversion soon after implementation. I've seen 2-3 major VMWare resellers pop up in a population 200k area in the last year and 3 very large companies in this area actually doing implementations and shutting down hardware pre-depreciation only 1-2 years old. Along with this, major S.A.N. purchases from Dell, IBM, and Xiotech.
Of course there is a limit, but I can understand the high price of VMWare stock. It is really on fire right now. Don't know if the price is right...and don't have a crystal ball.
What I DO know is what is happening in I.T. regarding virtual implementations. It is not an experiment anymore. It is the core production maching O/S.
I was a software engineer 14+ years ago (no kidding). I also have a graduate degree related to investment.
You don't have to guarantee me anything. I simply knows this space much better (not just technically).
Lets say that EMC market cap offer is $55 Billion.
Currently EMC is at $42B of which $28B (ish) is attributed to the VMW asset they own...
If you offered $55B for EMC would that not imply a higher value for VMW?
If 66% of EMC's value is VMW asset - then 66% of $55B is $37B - a 33% increase... Does that imply a stock price of $114 for VMW?
Is this stupid talk and I should just stop?
It wouldn't necessarily affect VMW. Would depend on the purchaser's objective. However, if I was advising, I would immediately spin off VMW to shareholders, assuming it would still be tax free. Don't know the law, specifically. Great way to pay a dividned and subsidize the EMC purchase.
1st, correcting my previous post, the jump was in Q4 '09 and comparisons get tougher beginning Q4 of this year.
As to hitting 150, it could hit 150 at some point, but not next year, unless irrationality prevails. Growth rates WILL slow, and the multiple WILL contract, if only as a result of the laws of large numbers.
Further, EMC WILL spin this off, and that WILL vreate a huge amount of supply. What % of EMC holders will hold VMW? My guess is that man of them will dump it.
And you don't have to listen to me. Take your cues from EMC. Watch how they purchase. Aggressive under 80. Very light above. Will probably file a Form 4 today averaging 8,000 shares per day over the last 3 days.