Welcoming the New Kid on the Software Block
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Instead, I'll focus on VMware itself. Here are a few things to keep in mind as you mull whether to buy the stock. The buzz -- or if you prefer, hype -- about VMware had been mounting for weeks. Yet the stock still appears to have been under-priced. The expected range moved from $23-$25 to $27-$29 -- and then the shares were priced at the high end. They opened at 52 Tuesday. By Thursday's close, they were at 57. That gave VMware a stock-market value of $21.7 billion, which makes it the third-largest Silicon Valley software company, just a hair behind Adobe (ADBE). Oracle (ORCL) remains No. 1, at about $98 billion.
The other key factor: VMware has very little competition. Microsoft (MSFT) has a virtualization project called Viridian, but it won't ship until sometime next year. The other key competitor is another Palo Alto company, XenSource. One day after VMware's IPO, it cut a deal to sell to Citrix Systems (CTXS) for $500 million. Until now, the core business at Florida-based Citrix has been piggybacking on Windows, making it easier for people to use software applications on various systems and devices. Citrix execs made it clear that they intend to do the same thing here, and ride Microsoft's coattails.
XenSource, which is built on an open-source virtualization platform called Xen, last year inked a deal that lets them build applications on top of Viridian, and which makes Viridian and Xen-based servers compatible.
VMware's biggest rival, in other words, is being acquired by a company with deeper pockets, a large customer set and ties to the only other outfit that VMware has to worry about: the big boys up in Redmond. (Analysts at the 451 Group, a research firm, last week speculated that Microsoft might buy Citrix, but Citrix officials downplay the idea.) |
