This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

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.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs