Shares of VMware (NYSE:VMW), the virtualization infrastructure provider increased more than 20% this year thanks to several catalysts enjoyed by the company. In addition, the wide customer base of VMware’s parent EMC’s (NYSE:EMC) and growing suite of solutions is also positive indicator for VMware investors who can expect the company’s outperformance to continue. Going forward, VMware should continue to perform robustly with the continued growth in data consumption across the globe and growth of virtualization.
VMware is very well positioned to allow its customers to transition to the cloud. It allows IT teams to release resources from their client-server environments, and build the mobile cloud infrastructure to help them drive their businesses with its portfolio of solutions that range from the desktop, to the data center, to the cloud going forward.
- Warning! GuruFocus has detected 2 Warning Signs with VMW. Click here to check it out.
- VMW 15-Year Financial Data
- The intrinsic value of VMW
- Peter Lynch Chart of VMW
Its customers have great confidence in its ability to help them address IT requirements of both today and tomorrow as indicated by a robust performance in the fourth quarter and in 2013. VMware targets on three strategic priorities, and is executing well to accelerate growth and deliver in the long run.
There’s strong acceptance for SDDC (Software Defined Data Center) of VMware. NSX which is VMware’s network virtualization platform is being adopted by Global brands such as McKesson (MCK), Starbucks (SBUX), Medtronic (MDT), Best Buy (BBY), and China Telecom (CHA) to make their networks more agile and efficient.
IT management is an important component of SDDC, and it is growing quickly and also gaining share. The new cloud management capabilities added to the portfolio of VMware is allowing IT teams to move at a faster pace to support the requirements.
The solid performance of VMware is driven by the launch of vCloud Hybrid Service in May last year, followed by general availability in the U.S. in September and beta availability in the U.K. in December. The hybrid cloud solutions of the company are received positively by the customers.
Key acquisitions and other strategies
VMware recently entered into an agreement to acquire AirWatch, a provider of enterprise global management and security solutions. This acquisition would improve VMware’s end user computing group. Moreover, VMware’s long-term growth will increase significantly by delivering a complete and proven enterprise-class solution for empowering the mobile workforce with the addition of AirWatch.
Additionally, VMware became a key provider of desktop as a service (DaaS) solutions the acquisition of Desktone. There are positive result of this acquisition, with a rapid growth in partner community, including tier one service providers, and a robust pipeline of customers modernizing and shifting their desktop infrastructure to the cloud.
VMware is witnessing good traction and revenue growth with its solutions allowing customers to minimize their costs for their existing IT environments, along with building out the mobile cloud infrastructure to power their businesses in the future. This can be seen from the fact that VMware’s total bookings in Q4 in the EMEA region increased in double-digits.
VMware also furthered its strategic relationship with customers. It enhanced its ability to sell more products, and expanded its portfolio, leading to increased demand for NSX and vCloud hybrid service coupled with robust demand for vCloud Suites, management, automation, and EUC products.
An excellent performance of VMware is due to the vCloud Suite and vSphere with operations management which should continue in the future. VMware’s fastest-growing product groups include Management and automation. The license bookings growth of over 40% last year was mainly driven by the Cloud management and automation. The path to the software defined data center is believed to go through management and automation, according to VMware and is expected to continue to drive its growth in 2014 and beyond.
VMware seems expensive looking at the trailing P/E above, but its forward P/E ratio of 25.94 indicates healthy growth in earnings for the future. Both, quarterly revenue and quarterly earnings growth are quite impressive, and the excellent forecast for the next five years signifies that investors can expect robust long – term returns from the stock.
VMware has recorded impressive growth this year and is expected to continue the same in the future as well. The growth in software defined networks and hybrid cloud has enabled VMware to outperform and its suite of product offerings should ensure it to celebrate good times going forward. Further, it has reported impressive earnings growth so far and the projection for the future also seems to be quite positive. Therefore, investors should definitely invest into VMware to benefit from the growth in cloud and virtualization.