Wednesday, January 26, 2011

VMware (NYSE:VMW) Remains Attractive on "Cloud Computing" Secular Trend

After the earnings season is over, Needham expects investors to flock back to VMware (NYSE:VMW), saying that cloud computing infrastructure remains among the strongest secular trends for software.

Needham says, "We believe VMware continues to be in the middle of a secular trend towards virtualization of IT infrastructure. It is our sense CY10-11 is the year of 'build-out' for public and private cloud infrastructure, suggesting we are still in early stages of license consumption in a multi-year trend. We believe investors will move back to VMW shares, post earnings season, as the attractiveness of “cloud computing” infrastructure (VMW, Riverbed Tech (Nasdaq:RVBD), others) remains one of the best secular trends in software...Our estimates for CY11 go from $3380m and $1.86 to $3507m and $1.86 EPS; introducing CY12 of $4000m and $2.20 EPS."

Needham & Company maintains a "Buy" rating on VMware (VMW), which closed Tuesday at $84.28, down $3.45, or 3.93 percent. Needham boosted their price target on VMWare from $90 to $95.

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