VMware Loaded, Ready to Run
PALO ALTO, Calif. (
) --
VMware
(VMW) - Get VMware, Inc. Class A Report
is expected to reap the benefits of an improving economy when it reports its third-quarter results after the market closes Wednesday.
The virtualization trailblazer's shares have almost doubled in value since the start of the year, and VMware has certainly been feeling the analyst love in recent weeks.
Jefferies & Company recently
VMware on the strength of improved virtualization spending, and the analyst firm also raised the software maker's price target from $30 to $40.
"We believe improvement in virtualization spending in the second half of 2009 could boost top and bottom line for VMware," wrote Jefferies analyst Katherine Egbert, in a note. "While some customers still remain cautious, formerly delayed projects are now moving along and some strategic initiatives are being reignited."
Analysts surveyed by Thomson Reuters expect VMware to report sales of $473.95 million and earnings of 20 cents a share. The company, however, has been experiencing a slowdown in its phenomenal growth of recent years. In the third quarter of 2008, for example, VMware brought in revenue of $472 million, a 32% increase on the prior year, and earned 24 cents a share.
Wedbush Morgan analyst Kaushik Roy is nonetheless bullish on VMware's prospects and predicts a boost from
Intel's
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Nehalem processor and
TheStreet Recommends
Microsoft's
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soon-to-be-launched
operating system.
"Intel's upcoming server processor
is expected to catalyze server sales," he wrote, in a recent note. "
And the Microsoft Windows 7 desktop software related refresh
is seen as a driver for IT managers to deploy desktop virtualization software."
Roy, who also pointed to good adoption of VMware's
, raised the company's price target from $40 to $47.
Virtualization lets users divide physical hardware into multiple "virtual" chunks and has grown in popularity amongst users looking to juggle myriad of operating systems and applications. With companies also struggling with budget pressures, VMware and its rivals are pushing virtualization as a way for firms to reduce the amount of server and storage hardware within their data centers.
Oracle
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, for example,
snapped up
virtualization specialist
Virtual Iron
earlier this year, and
Citrix
(CTXS) - Get Citrix Systems, Inc. Report
recently teamed up with Microsoft in an attempt to challenge VMware.
Not to be outdone, VMware has been busy forging its own partnerships, recently clinching a deal to sell its software
pre-installed
on
Lenovo
servers. The software specialist has also teamed up with service provider
Savvis
(SVVS)
and
Cisco
(CSCO) - Get Cisco Systems, Inc. Report
around
.
Clearly keen to exploit an improving economic climate, VMware opened its wallet during the summer,
privately held cloud specialist
SpringSource
in a
deal
worth $420 million.
During its recent second-quarter results VMware beat Wall Street's sales and profit estimates, despite taking a second-quarter earnings hit.
The company's shares rose 17 cents, or 0.38%, to $44.81 Wednesday, mirroring the broader advance in tech stocks that saw the Nasdaq gain 0.79%.
-- Reported by James Rogers in New York
