Tech Update

VMware's Competitors Narrow the Gap

 

SAN FRANCISCO - VMware(VMW) must walk a fine line between revenue growth and price cuts to remain the market leader in virtualization.

A report released Wednesday shows the company's market share is eroding quickly as competitors close the technology gap with lower-priced products. But the report's author says new leadership at VMware may help stem the trend.

The stock was recently up $2.18, or 6.2%, to $37.41, surpassing its one-year price target of $36, according to Thomson Reuters. The stock has enjoyed a two-day gain of 12% since closing at $33.33 Tuesday.

Virtualization software helps corporate data centers drastically cut hardware, energy and cooling costs by making more efficient use of servers and desktops.

Yankee Group analyst Laura DiDio estimates the entire virtualization market will take in about $12 billion to $14 billion in 2009, growing at a 25% to 30% compounded annual rate over the next three years. In 2011, the worldwide market will be worth about $20 billion in revenue, she says.

VMware has 75% of the market, but lowered its growth forecast at its most recent earnings call, in part due to Microsoft's(MSFT) early release of its virtualization hypervisor technology in late June. The Hyper-V is loaded onto Windows Server 2008 -- a move that is expected to make deal closure more difficult for VMware.

Oracle(ORCL), IBM(IBM), Hewlett-Packard(HPQ), Sun Microsystems(JAVA), Virtual Iron and niche player Parallels are all chipping away at VMware's dominance, according to DiDio.

"Oracle in particular is poised for explosive growth in the application virtualization and virtual appliances segments given its recent acquisition of middleware vendor BEA Systems," DiDio wrote.

TheStreet Premium Services

Jim Cramer
Jim Cramer's Action Alerts PLUS:
Trade right alongside a Wall Street pro — enjoy access to his Charitable Trust portfolio and be sent trade alerts BEFORE he makes a move. Learn More
OptionsProfits
OptionsProfits:
Get 50+ trade ideas a week from the industry's top options experts. Plus — exclusive commentary on market trends and essential trading tools. Learn More
Real Money
Real Money:
Our team of professional Wall Street Pros — including Jim Cramer, Doug Kass, and Nicholas Vardy — delivers intelligent analysis, timely trade ideas, and colorful commentary. Learn More
Stocks Under $10
Stocks Under $10:
Break into the market with small- and mid-cap stocks... all $10 or less! David Peltier tells you exactly which low-priced stocks he's buying and selling. Learn More
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
blog comments powered by Disqus
Dow Jones S&P 500 NASDAQ 10-Year Note
12,393.45 1,310.33 2,827.34 15.81
Oil *
101.78
DOWN
26.41
DOWN
2.99
DOWN
10.02
DOWN
0.44
10 Yr
1.58%
SPDR Gold
151.62
-0.21%
-0.23%
-0.35%
-2.71%
Data delayed 20 minutes

Top Stories and Tools

Articles From

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

We respect your privacy.
Podcasts

Connect with TheStreet