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VMware, Inc. Message Board

  • financefrau financefrau Jan 30, 2013 11:57 AM Flag

    UBS Still A Buy

    New Team. Better Strategy.

    „Strategic Change in Right Direction, Guidance Looks Too Doomsday
    VMW is refocusing on core competency (private/hybrid cloud) and eliminating the
    costs/distractions of tertiary low-TAM areas. More focus means less missteps for
    customers (eg, vSphere pricing fiasco) and for shareholders faster growth/higher
    margins over time (‘more wood/fewer arrows’). Guidance looks overly pessimistic
    (continuation of weak Fed/Fin Services, no big deals, muted ELA trends) mixed
    with typical ‘new CFO’ conservatism. While ‘1 more reset’ risk to est’s from 3/13
    ‘Pivotal’ event, magnitude of tailwinds (details inside) suggest ‘beat/raise’ 2013.
    „ Adjusting Estimates
    FQ1 to $1.86B/$0.68 from $1.26B/$0.76. FY13e to $5.23B/$3.13 from
    $5.45B/$3.33 on license +7.0% (taking conservative view until better understand
    on 3/13 ‘Pivotal’ spin P&L impact). FY14e to $6.0B/$3.59 from $6.3B/$3.79.
    „ FQ4 - Notable Items
    Pros: 1) Better than expected European bookings. 2) Exceeded bookings plan for
    critical product vCloud Suite. 3) vCloud Suite 3x greater ASPs than vSphere. 4)
    vSphere ASPs ticked higher q/q suggests muted competitive impact from MSFT.
    Cons: 1) Weak bookings for US (industry theme in Q4) and major verticals
    Federal/Fin Services. 2) Failed to quantify P&L impact from ‘Pivotal’ spinoff
    (expected 3/13, co still working through finc’l impact). 3) OCF $100M light.
    „ Valuation: AH Trade 18x FY13 FCF/share. Buy Pessimism/Sell Optimism.
    Stock has been in 3-yr trading range $75-$115. We continue to rate the shares Buy
    at current levels. PT to $115 = 21x revised forward NTM FCF.

    Sentiment: Hold

73.44+0.06(+0.08%)Sep 26 4:04 PMEDT