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VMware, Inc. Message Board

  • ppcapture ppcapture Jul 27, 2011 3:53 AM Flag

    Can't explain why VMW's valuation is so high

    First look at the other two well managed companies:

    Apple - Earning Growth: 124%, Return on Equity: 41.99% (very profitable), P/E: 12.75, Price/Book: 5.39
    Google - Earning Growth: -8%, Return on Equity: 19.16% (quite profitable), P/E: 14.87, Price/Book: 4.10

    Now look at VMW - Earning Growth: 60%, Return on Equity: 11.61% (so so), P/E: 42.96, Price/Book: 11.11

    VMW is no where near how Apple/Google dominate their markets; its profitability is not so great. I don't get it how can they receive those ridiculously high P/E ratio and Price/Book ratio.

    If VMW is measured at similar level as AAPL or GOOG, VMW's stock should be around 50 bucks.

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    • At the end of the day, a business is a business - whose goal is to make profit. It doesn't matter what it makes - software, hardware, medicine or guns. The things that matter are growth potential and profitability from that revenue growth. Otherwise you would end up with one model(yardstick) for each type of business - that's just absurd.

      It's a safe bet that none of you have used VMW's most profitable product (hint: not the desktop virtual machines). They charged too much for sure and the alternatives (from Citrix, Microsoft, Oracle, etc.) are getting better than before.

      There are so called "perception" factors. But Benjamin Graham put it best: " ... since in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine". So "perception" makes the stock more volatile - that's all it does.

    • VMware should be evaluated as a software company like Microsft and Oracle. Hardware companies have more risks, for they need to replace products very rapidly, and their market is fragile.

      Apple has 94% market share last year, but only about 60% this year, in a major section. Guess what it is? Hint: Microsoft grabs 36% of that market in just a year.

    • Stock price has nothing to do with reality. All and demand. This is why you can't apply mathamatical logic into the price of a company like VMW, or Apple.

      Perception, Why is a toy maker like Apple worth more to us as humans than General Electric? Dumb, huh? If you were an alien and came to Earth and looked at the Stock Market, you would say that we put more emphasis on toys (Iphones, Ipads, Ipods) than aircraft engines, railroad engines, medical technology, power plants, etc...

      You get it!!

    • company will make a billion in profit next year.

      this company is very young.

      100% of Fortune 100 companies use VMW, as well as thousands of others. licensing and maintenace fees are steady income. that is competitive advantage.

      Intel, Cisco, and EMC are owners.

      only 30% market has been penetrated.

      virtualization saves money and energy, so expect more growth. lot of areas left to virtualize.

      in the future, VMW will make Microsoft, Nintendo, Gamestop, and Rimm obsolete. Operating systems will lose importance, game systems will disappear and everythign will be done on the internet, cell phones will be virtualized so regular phone can be a work phone and data is separate.

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