Shares of VMware, Inc. (VMW, Financial), one of the largest software infrastructure vendors in the world, continued to fall in the fourth quarter, declining 28%. The company is majority owned and controlled by EMC Corporation. During the quarter, EMC and Dell Inc. finalized EMC’s acquisition by Dell, which means that VMware will become a Dell-controlled company. Confusing messaging around the shift in business model under the new owner sent the stock to what we believe is a significant discount to VMw’s intrinsic value. After selling a significant portion of our position during the fourth quarter, we decided to pause thinking that sooner or later the market will appreciate the cash flow generation potential of this company and we will get a more gracious exit.
From the Baron Fifth Avenue Growth Fund Fourth Quarter 2015 Letter.
