NEW YORK (TheStreet) -- As much as Wall Street seems to love virtualization giant VMware (VMW), the stock remains priced for perfection, a point of contention for many investors. The question has always been can the company grow into its valuation and maintain the sort of momentum needed to justify its price-to-earnings ratio of 50.With each passing quarter, VMware has replied, "yes, we can." This has been despite stiff competition from rivals such as Microsoft ( MSFT) and Citrix ( CTXC). However, during its most recent quarter, its numbers suggest that things were less clear than the usual slam dunks.
As a result, the company has since turned its attention to growing sales to fight off the likes of IBM ( IBM), Hewlett-Packard ( HPQ) and Red Hat ( RHT). The company is willing to do this now even at the expense of near-term profits. But will the strategy pay off? The company is willing to spend to grow, but it also needs to answer from where the growth is going to come. VMware is the undisputed market leader in virtualization -- this much is a given. But how about the other markets in which it competes, which include desktop virtualization, servers as well as system administration tools. Investors are left to speculate how well the company can grow market share in these areas -- particularly as rivals are projecting tougher quarters ahead. Investors should also not assume these rivals are simply going to roll over and concede the market for VMware.