In a bid to strengthen its desktop virtualization segment, VMware Inc. (VMW) is set to acquire Wanova Inc., a cloud-based desktop virtualization solutions provider. The financial details of the deal were not available.
Privately-held Wanova Inc. has its headquarters in Silicon Valley, California, and has a research facility in Netanya, Israel. The Wanova acquisition will expand VMware’s end-user computing product portfolio. With the combination of Wanova’s Mirage and VMware’s View, clients will get an integrated desktop virtualization solution in a cost-effective manner.
Desktop virtualization essentially eliminates the location-based access problems, as employees in an enterprise can access and manage required business data that are lodged in their respective desktops remotely from multiple devices (PC, Laptops and Mac). According to ABI Research, the global market for virtual desktops is projected to grow from about $500 million in 2009 to nearly $5 billion in 2016.
Another study by IDC reveals that the virtual client computing market is expected to increase from $2.3 billion in 2011 to approximately $3 billion by 2015. Incidentally, the centralized virtual desktop market is expected to account for nearly a third of the estimated amount.
According to a recent study by Citrix Systems Inc. (CTXS), the demand for desktop virtualization should increase manifold. Thereby, Citrix as well as VMware can immensely benefit from this opportunity, as the two companies together account for nearly 80% of the total desktop virtualization market.
Incidentally, Microsoft Corp. (MSFT) has 15% market share in the aforesaid domain. We believe that the acquisition will expand VMware’s customer base and market share, as demand from the enterprises inflates going forward.
We believe that VMware’s strong and innovative product pipeline along with its strategic acquisitions will enable the company to drive its top-line growth over the long term. Moreover, the company’s continued strong performance in international markets and focus on emerging markets will also be a crucial factor over the long term, in our view.
Enterprises that are shifting to the cloud need the kind of infrastructure that VMware has on offer. We therefore expect VMware to benefit from increased adoption of virtualization and cloud-computing technologies going forward.
However, we believe that the sluggish European market and a relatively weak IT spending environment are the near-term challenges.
We have an Outperform recommendation on VMware over the long term. Currently, VMware has a Zacks #2 Rank, which implies a Buy rating on a short-term basis.
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