"Market Dynamics are Shifting Towards Customer-Validated Ideas" According to Application Software Expert

• On 2:03 pm EDT, Monday August 31, 2009

67 WALL STREET, New York - August 31, 2009 - The Wall Street Transcript has just published its Application Software Report offering a timely review of the sector to serious investors and industry executives. This 123 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Upgrade Cycle for Application Software -- Software as a Service -- Cloud Computing -- Virtualization Software -- Government Software Sales Cycle -- Demise of Unix -- Installed Base of Microsoft Software -- Installed Base of Oracle Software

Companies include: Microsoft (MSFT); VMware (VMW); Oracle (ORCL); RedHat (RHAT); Sybase (SY); Google (GOOG); Symantec (SYMC); Avocent (AVCT); Novell (NOVL); SolarWinds (SWI);CommVault (CVLT); Data Domain (DDUP); IBM (IBM); SPSS Inc. (SPSS); Steel Vault (SVUL); StrikeForce Technologies (SFOR); Jagged Peak (JGPK); Lyris, Inc. (LYRI); Saba Software, Inc. (SABA); TTI Team Telecom International (TTIL); AMICAS, Inc. (AMCS); Sonic Solutions (SNIC); BluePhoenix Solutions Ltd (BPHX); ArcSight, Inc. (ARST); Etelo, Inc. (ETLO); Pansoft Company Limited (PSOF); Exobox Technologies Corp. (EXBX); PROS Holdings, Inc. (PRO); Proginet Corporation (PFGF); Versant (VSNT); Wyndstorm Corp. (WYND); China Digital TV Holding Co. (STV); QAD Inc. (QADI); Magic Software Enterprises, Inc. (MGIC); Wizzard Software Corp. (WZE); SXC Health Solutions Corp. (SXCI); Telvent (TLVT).

In the following brief excerpt from the 123 page report, Trip Choudhry, Co-Founder of Global Equities Research, LLC., discusses the outlook for the sector and for investors.

TWST: What are you focusing your attention on in the application software space these days?

Mr. Chowdhry: I think we need to focus on five companies, which are in the midst of some shifting market dynamics: Microsoft (MSFT) being one, VMware (VMW) being another, Oracle (ORCL) being another, Red Hat (RHT) being another and Sybase (SY) being another.

TWST: What's driving that purchasing cycle?

Mr. Chowdhry: So the first one is Microsoft. Contrary to what people believe, we definitely see that there is a very vibrant ecosystem still prevalent for Microsoft. The installed base of Microsoft just needs a small tailwind to go for a very massive upgrade cycle that is going to occur starting October of this year and going into September of next year, that is 2010. These upgrade cycles are: on the desktop side, Windows 7; then on the cloud side, in the month of October/November, its Azure cloud platform that will be launched. Then going into early next year, it's the launch of Exchange 2010; then later, mid-2010, there's a launch of Sequel Server 2010. Taken all together and considering the fact that there is a regulatory pressure for the existing customers to upgrade to the new products for compliance reasons, I think the upgrades would be big, taking into the fact that economy is still struggling. So that is the key thing for Microsoft: very strong product line, the installed base needs to upgrade because of compliance and regulatory reasons, and probably the upgrade cycle will last for - I mean, it starts from October and probably the new product cycles continue to be delivered in the month of September of next year. Then the other thing on Microsoft is the cloud platform, which is experimental right now.

TWST: What do you like about VMware?

Mr. Chowdhry: There are three things that this company has done. They were losing market share to both Citrix (CTXS) and Microsoft and Oracle, they came up with their own virtual - before we go into that let me explain what VMware does. VMware provides virtualization software, which usually is installed in the data centers of large enterprises as well as with the public ISPs, Internet Service Providers or hosting providers. This is a way to gain efficiencies from your existing hardware. But what happened over the last 12 months, VMware was losing market share to - and also I would say they lost some pricing power to - new entrants in their space, such as Microsoft, Oracle and Citrix. What we have sensed over the last quarter, VMware has turned the tide around, and what they have done is they have disciplined, which is the most important thing, they have disciplined their competition from making outrageous claims on their virtualization software because VMware has about 50 patents and one of the most important patents was granted to them in January of this year, which is called VMotion. VMotion is very critical to any virtualization deployment. Just like in a word processor you need a spell checker, if you don't have a spell checker your word processor is good, but not complete. Similarly, VMotion allows you to migrate your systems' and processors' life under any load condition, and VMware has got that patent. Now that is very critical and that has pretty much slogged the competition into retrenchment, basically. That is, their competitive threats that existed six months back have been almost dissipated because VMware has become very forceful to enforce that they are the thought leaders. They have their patents and probably if the customer puts a bet on VMware solutions, it's a safer bet versus if somebody puts a bet on Microsoft virtualization products or Oracle virtualization or Citrix - it's not a safe bet because there could be some patent infringement down the road that VMware could unleash on the competition.

TWST: How about Oracle?

Mr. Chowdhry: Oracle's strategy has always been surround the customer with everything and all the things that they ever need. So basically what Oracle has done is they have surrounded the customer by buying a lot of companies in the enterprise space so that they become one-stop shopping for all their enterprise needs, whether it's software, whether it's services, whether it's acquisition - buying a database or a middleware or an application or whatever. So basically they are saying if an enterprise needs something, they will definitely have a solution for that. So it gives them two things: number one, an expanded customer base; number two, enhanced pricing power; number three, a lot of stickiness and a lot of built-in switching cost. What that means is, the customer benefits in a way because they're dealing only with one vendor and they can extract some good pricing. But it also benefits Oracle because they enjoy both economies of scale and economies of scope.

TWST: Thank you. (MJW)

TRIP CHOWDHRY Co-Founder Global Equities Research, LLC 18 Terrace Ave. Half Moon Bay, CA 94109 (650) 281-8747 www.globalequitiesresearch.com e-mail: research@globalequitiesresearch.com

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 123 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

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