[Posted on January 9, 2008 - 5:15 PM]
E-mail
del.icio.us
Technorati
DiggIt's been a bit of a roller coaster ride for VMware Inc. [VMW], the company that did for virtualization what Google Inc. did for search. While VMware's shares have consistently traded well above its summertime IPO price, they have shown dramatic swings as investors seemed unsure whether the company is the clear leader in a disruptive technology or the flavor of the day in a sector that would take time to take root.
On Wednesday VMware got a nod from the optimistic camp when Lazard Capital Markets issued a $100 per share price target on the company's stock and said it has a commanding lead that competitors would be hard-pressed to catch up with. Although VMware's stock has moved as high as $125.25 since going public, it has also drifted much lower and currently trades around $80.
In a bullish research note, Lazard emphasized that VMware has a market share of more than 75% among virtualization players and is using that lead to expand into related businesses. Here are what the bank sees as the keys to VMware's growth strategy:
Broaden the product portfolio. VMware intends to provide additional
solutions that will leverage its virtualization technology in order to further
optimize the value and reliability of its computing infrastructure. VMware
may also pursue the acquisition of companies with complementary
products and technologies.
Enable customer choice and drive standards. VMware software is
designed operating system agnostic and as an independent extension of x86
hardware.
Expansion into adjacent markets. VMware is leveraging its customer
base and expanding into adjacent markets. Given its server virtualization
base, VMware has the ability, in our opinion, to expand into desktop
virtualization, disaster recovery, configuration and change management,
storage virtualization and management, and security and vulnerability
management.
Deeper penetration into new and existing customers. VMware believes
that there is significant opportunity to increase sales to existing customers
through different business units, upgrades and broad enterprise
deployments. The company will continue to aggressively pursue new
customers globally by expanding its direct and indirect sales channels.
Market education. VMware offers free solutions that allow customers to
evaluate the company's virtualization technology. VMware also hosts the
annual VMworld industry conference to increase global awareness of
virtualization solutions.
Broaden the product portfolio. VMware intends to provide additional
solutions that will leverage its virtualization technology in order to further
optimize the value and reliability of its computing infrastructure. VMware
may also pursue the acquisition of companies with complementary
products and technologies.
Enable customer choice and drive standards. VMware software is
designed operating system agnostic and as an independent extension of x86
hardware.
Expansion into adjacent markets. VMware is leveraging its customer
base and expanding into adjacent markets. Given its server virtualization
base, VMware has the ability, in our opinion, to expand into desktop
virtualization, disaster recovery, configuration and change management,
storage virtualization and management, and security and vulnerability
management.
Deeper penetration into new and existing customers. VMware believes
that there is significant opportunity to increase sales to existing customers
through different business units, upgrades and broad enterprise
deployments. The company will continue to aggressively pursue new
customers globally by expanding its direct and indirect sales channels.
Market education. VMware offers free solutions that allow customers to
evaluate the company's virtualization technology. VMware also hosts the
annual VMworld industry conference to increase global awareness of
virtualization solutions.
"We believe VMware can leverage its 20,000 customer installed base to offer additional products, including desktop virtualization, significantly expanding the company's addressable market," the investment bank said. While acknowledging that competitors were flooding into the virtualization space, it said that VMware's 10 years of development experience and its operating system-agnostic architecture would give it a significant edge. - Andrea Orr
