VMware (VMW) Shares Drop 21% on Weak Outlook by TechStockProspector


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									Robert DeFrancesco’s
January 29, 2013

VMware (VMW) Shares Drop 21% on Weak Outlook
NOW AVAILABLE: The January 2013 issue of Tech-Stock Prospector for your
Amazon Kindle or Kindle for iPad/iPhone reading app.

Here are some of the topics covered in the January 2013 issue:

*The smartphone battles heat up
*Apple searches for its lost momentum
*Best for 2013: LinkedIn or Facebook?
*There’s hope for Acme Packet
*Oracle’s cloud buying binge continues
*2 possible takeover targets in interactive marketing
*Cornerstone OnDemand benefiting from disruption
*A cloud name to watch: SPS Commerce
*Intel plans IPTV service
*How Fortinet can gain share in networking security
*Tibco Software tries to recover from stumble
*Why some big investors like Brightcove shares now
*A strong debut for Ruckus Wireless IPO
*New Symantec CEO is ready to make changes
*Aruba Networks capitalizes on BYOD trend
*Deal Report: Adobe Systems goes social

Order the January 2013 issue here:


Here’s a toxic mix for investors: slowing growth and a high valuation. Today, this
combo hit shares of VMware (VMW, $77.14), a provider of enterprise virtualization
solutions. The stock fell more than 21% and hit a new 52-week low on massive
volume of 27.7 million shares, 15x average daily volume.

The main negative here is management guided 2013 license revenue growth to a
range of 8% to 11%, down from 13% growth in 2012. There were problems evident
in the Q4 numbers, particularly the fact that U.S. bookings fell short of expectations.
VMware’s weaker than expected transactional business, which flows through the
channel, is troubling as well.
For Q1, VMware guided revenue to a range of $1.17 billion to $1.19 billion, below
the consensus estimate of $1.25 billion. The license revenue guidance ($480 million
to $490 million) was surprisingly conservative, representing an 18.7% sequential
decline at the midrange.

Nomura thinks competition from Microsoft and Oracle is hurting pricing in
virtualization software. Many Wall Street firms downgraded VMware stock because
of concerns about slowing growth. With earnings estimates coming in, VMware
shares will need to find a new base at a lower valuation. The stock is down 35%
from its 52-week high of $118.79.

But Barclays believes the pullback represents a buying opportunity. The firm has a
lofty price target of $120. Barclays says vCloud metrics are healthy and looks for
license revenue growth to accelerate in the second half of the year. FBR Capital
agrees (it has a price target of $115), saying the company will benefit from “major
growth tailwinds” in 2H involving large contract renewals and product cycles.


Read the latest issue of Tech-Stock Prospector on your Amazon Kindle or Kindle for
iPad/iPhone reading app.

Here’s the Kindle link: http://www.amzn.com/B004T6Z0ME


Tech-Stock Prospector Managing Editor Rob DeFrancesco has more than 20
years of experience covering the tech sector. He is a former senior writer with
Louis Rukeyser’s Wall Street.

TechStockProspector.com, launched in 2003, is an investment-research service
focused primarily on the networking, storage, security, wireless and software
sectors. Annual subscription: $350.

For more information or to place an order, call 800-392-0998.


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