Although VMware is still the clear leader in the virtualization business, weak enterprise IT spending has taken a toll on its business. Consequently, VMWare's stock is down nearly 30% so far this year as the Street takes a wait-and-see approach.
Fairly or unfairly, these concerns have impacted how the market views EMC, which has seen shares slide 4% this year. This is while rival NetApp (NTAP - Get Report) has posted 11% gains. But I suspect all of this is about to change.Earlier this year, Joe Tucci, EMC's chairman and CEO, who is one of the most underrated leaders on the market today, discussed his company's position on the market. He said:
"EMC remains squarely at the center of the most disruptive and opportunity-rich shift in IT history, propelled by the benefits of cloud computing, Big Data and trusted IT. These high-priority IT spending areas are core to our strategic focus and represent market segments where EMC has established leadership positions and competitive advantage."Essentially, while the market was discounting EMC's prospects, management showed strong confidence in its capabilities.
It recently launched ViPR, a "software-defined storage" platform designed to provide IT departments and enterprises with a cost-effective and simple way to manage large data centers via the Web without sacrificing features. With ViPR, EMC has responded to Amazon.com's (AMZN - Get Report) dominant cloud platform, known as Amazon Web Services, which had become the standard for IT departments looking for a low-cost way to shift their hardware and software data-center functions to the cloud. As more companies migrated from local storage, this diminished the importance of EMC and its strength in "Big Data." It also raised questions about VMware's profit potential and the overall direction of the virtualization market. But with ViPR, EMC becomes a formidable rival to Amazon, the Street understands why Tucci had spoken with such confidence a couple of months ago.
Given how widely regarded Amazon Web Services is, ViPR likely won't dethrone Amazon right way. But I don't believe it has to. And it doesn't seem as if that is what EMC's management cares about. ViPR's support of third-party hardware and software, even from NetApp and Microsoft (MSFT), speaks to the level of self-belief that EMC has as a market leader.