VMware’s (NYSE:VMW) shares have been gaining ground on the back of strong tailwinds. Moreover, EMC’s (NYSE:EMC) wide client base and its expanding suite of products is additional catalyst for VMware, as EMC is VMware's parent company. The consistent upsurge in data consumption and growth of virtualization globally should help VMware sustain its growth momentum.
Few growth drivers
VMware is ideally positioned to empower its clients’ bid to move to the cloud. The company’s diverse portfolio, ranging from the desktop, to the server farm, to the cloud, is facilitating IT teams to do away with client-server infrastructure setup, and migrate to the versatile cloud framework that will drive their organization's growth going forward. VMware is focusing on key initiatives to keep its long-term growth story intact.
VMware's SDDC, or Software Defined Data Center, is enjoying solid adoption by clients. International big-wigs such as Mckesson (MCK), Starbucks (SBUX), Medtronic (MDT), Best Buy (BBY), and China Telecom (CHA) are utilizing NSX – VMware’s network virtualization setup to make their networks more lithe and proficient.
IT administration is a key part of SDDC, and it is developing quickly and picking up market share. VMware has added new cloud administration abilities to its portfolio, permitting IT groups to move at a quicker pace to support their infrastructure needs. According to VMware, the path to SDDC goes through automation and ease of management. Cloud management and automation were important drivers behind license bookings growth of over 40% last year.
The vCloud Hybrid Service was launched in May last year. It was generally available in the U.S. in September and was followed by a beta launch in the U.K. in December. This service was one of the growth-catalysts for VMware as it received positive customer response for this solution. The vCloud Suite and vSphere have been key to VMware’s performance and this should continue going forward.
Acquisitions and other growth strategies
VMware has inked a deal to acquire AirWatch, an enterprise management and security solutions provider. This acquisition would beef up its end user-computing group. This is a significant development and a long-term growth driver, as it will allow VMware to deliver a comprehensive and proven enterprise-class solution for empowering the mobile workforce.
Likewise, the acquisition of Desktone vaulted VMware into the desktop-as-a-service, or DaaS, segment of market. As a result of a rapidly growing partner community and robust pipeline of customers who are migrating their desktop computing needs to cloud, this acquisition will keep the company’s long-term growth story intact.
VMware’s suite of products and solutions enable clients to minimize their IT spends and recurring costs, by moving to cloud environment. Hence, it’s no surprise that VMware is seeing good traction and thee's revenue gowth at a good clip. For example, VMware’s total bookings, in the EMEA region, grew in the double-digits during the fourth quarter. Moreover, strengthening of its strategic relationship with customers has triggered good demand for its NSX and vCloud hybrid service, vCloud Suites, management, automation, and EUC products.
VMware’s trailing P/E of 39.5 may look relatively steep. However its forward P/E of 22.42 reflects on profit growth going forward. Moreover, it has reported significant profit and the projection for the future looks truly enticing. The company has enjoyed a good run on the street on the back of rapid adoption of its software defined networks and hybrid cloud solutions. Investors looking to benefit from the growth in cloud and virtualization space should consider beefing up their position in VMware.