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VMware Comes Down to Earth

There are, to be sure, at least a couple of good reasons why virtualization pioneer VMware lost about a third of the value of its stock price on Tuesday following its Monday afternoon fourth quarter earnings report.

First of all, VMware's quarterly revenue number and its projections of revenue growth for 2008 both missed analysts' estimates. And, even though everything else for Q4 and 2007 actually looked pretty good, those two numbers coming up short was enough to scare off investors.

Beyond that, with a recession possibly looming -- and maybe even already upon us -- it doesn't take much to spook investors these days. Just ask Apple and Google. So, despite the fact that VMware continues to rake in the dough, its stock price is taking a hit.

Here at RCPU, we get all that, and we don't want to jump to conclusions. But, we do sometimes speculate a bit, and we wonder whether maybe, just maybe, Microsoft's concretization of its own virtualization strategy might have played in the backs of investors' minds this week. Oh, sure, Redmond has a long way to go to catch VMware technology-wise, and VMware itself is no sputtering start up -- it's 10 years old, majority owned by tech titan EMC and, stock-price catastrophe aside, still very, very profitable.

Still, we all know that unless it's consumer search or personal music players -- neither of which represents an enterprise-focused market -- Microsoft, when it gets good and ready, tends to make room for itself in new markets at the expense of incumbents. Obviously, that's not happening in virtualization...yet. It's the "yet," though, that intrigues us and might have given investors pause, as well, this week.

Or maybe not. In the current parlance of America's youth, we're not sayin' anything...we're just sayin'.

What's your take on VMware's stock-price tank? Let 'er rip at lpender@rcpmag.com.

Posted by Lee Pender on 01/30/2008 at 1:21 PM


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