From August 16 to October 3 2007, VMW has increased 52.92% (from 66.85 to 88.25). What made this stock so miracle? Let me find it out with you.
Overview
VM stands for Virtual Machine. A virtual machine is a tightly isolated software container that can run its own operating systems and applications as if it were a physical computer. A virtual machine behaves exactly like a physical computer and contains it own virtual (ie, software-based) CPU, RAM hard disk and network interface card (NIC).
An operating system can’t tell the difference between a virtual machine and a physical machine, nor can applications or other computers on a network. Even the virtual machine thinks it is a “real” computer. Nevertheless, a virtual machine is composed entirely of software and contains no hardware components whatsoever. As a result, virtual machines offer a number of distinct advantages over physical hardware.
What IT Specialists Say
- I have used it at my work for about 18 months to
consolidate around 50 old Win NT 4.0 and W2K servers down into a 2
server VMware cluster. This product works so well that we are now
going to use it for smaller production systems. My company sent me to
training and I am now a VCP (VMware Certified Professional … arent
you impressed :)).
- Yes we have used Virtual PC and Virtual Server and they do work and
Virtual PC is a great platform for developers, but it makes a free
server product as well. Our development team uses it and it seems to
be easier to manage than Virtual Server 2007. The benefit of it
(ESX) over Virtual Server is that it is a custom designed and has very
efficient kernel that handles the CPU,I/O,Memory etc. Microsoft’s
products sits on top of windows so its not as hardware efficient.
Microsoft is three layers instead of two. It is already big but it
will be getting bigger. I belong to the users group here in Orlando
and we get new members every month coming in to learn and discuss how
to implement it.
The free product is VMware Server (used to be call GSX), the product
is free support has a cost.
- I work for a software company that heavily uses the technology, and
I am the chief architect of the system we use. If you want to
understand the benefits of what these guys make, keep reading.
The most important point to make about this company’s product line is
the fact that it allows you to commoditize your hardware and place
important data on highly reliable, highly available storage systems.
IT shops understand the value of this, and companies such as Intel and
Dell are in bed with VMWare for building machines that benchmark ESX
well. For example, the 1950 class 2×4 core Xeon with 8GB RAM and a
SAN backend can easily and reliably run 5 high load systems with more
reliability than 5 individual systems. It reduces costs in HVAC,
Power, rack space, downtime and man-hours.
The end result is that while their software costs us a pretty penny,
the overall savings to us are over 50%, to say nothing of the added
benefits, such as being able to archive entire groups of systems. I
only buy one type of hardware anymore, and since all the systems are a
known quantity it makes troubleshooting much easier. Their plans for
expansion and improvements upon their existing product line will
continue to make my job easier and my company more efficient.
Strong Client Base Around the World
VMware has a variety of customers around the world, across different industries - Education, Financial Services, Food, Government, Healthcare and Pharmaceuticals, Law, Leisure, Manufacturing, Media, Professional Services and Consulting, Retail, Technology, Transportation and Freight and Utilities. Here are some of their customers:
Merrill Lynch
Ohio State University
Oxford University
Prudential UK
Siemens
Ratio
Valuation Ratios
| Company | Industry | Sector | S&P 500 | |
|---|---|---|---|---|
| P/E Ratio (TTM) | 234.59 | 28.60 | 29.53 | 20.92 |
| P/E Low - Last 5 Yrs. | NM | 19.38 | 17.70 | 13.99 |
| Price to Sales (TTM) | 34.85 | 6.93 | 5.03 | 3.00 |
| Price to Tangible Book (MRQ) | NM | 11.43 | 8.91 | 8.45 |
| Price to Free Cash Flow (TTM) | NM | 25.70 | 29.79 | 35.59 |
| Company | Industry | Sector | S&P 500 | |
|---|---|---|---|---|
| Dividend Yield | NM | 1.45 | 1.28 | 2.14 |
| Dividend 5 Year Growth Rate | NM | 31.38 | 13.27 | 11.58 |
| Company | Industry | Sector | S&P 500 | |
|---|---|---|---|---|
| Sales (MRQ) vs Qtr. 1 Yr. Ago | 89.74 | 23.23 | 17.00 | 14.59 |
| Sales - 5 Yr. Growth Rate | NM | 15.42 | 14.03 | 13.88 |
| EPS (TTM) vs TTM 1 Yr. Ago | 65.92 | 18.93 | 19.75 | 20.03 |
| Capital Spending - 5 Yr. Growth Rate | NM | 15.42 | 5.37 | 8.72 |
| Company | Industry | Sector | S&P 500 | |
|---|---|---|---|---|
| Quick Ratio (MRQ) | 1.04 | 1.35 | 1.91 | 1.26 |
| LT Debt to Equity (MRQ) | NM | 0.13 | 0.22 | 0.60 |
| Interest Coverage (TTM) | NM | 6.00 | 10.11 | 13.12 |
| Company | Industry | Sector | S&P 500 | |
|---|---|---|---|---|
| Gross Margin (TTM) | 82.79 | 74.83 | 51.95 | 44.95 |
| EBITD Margin (TTM) | NM | 28.55 | 19.83 | 23.20 |
| Operating Margin (TTM) | 16.20 | 24.75 | 16.64 | 19.70 |
| Pre-Tax Margin (TTM) | 16.21 | 27.09 | 18.67 | 18.58 |
| Net Profit Margin (TTM) | 12.90 | 18.78 | 13.69 | 13.66 |
| Effective Tax Rate (TTM) | 20.42 | 30.91 | 26.32 | 29.81 |
| Company | Industry | Sector | S&P 500 | |
|---|---|---|---|---|
| Return On Assets (TTM) | NM | 13.68 | 10.73 | 8.45 |
| Return On Investment (TTM) | NM | 20.19 | 15.62 | 12.47 |
| Return On Equity (TTM) | NM | 25.17 | 20.80 | 21.49 |
| Company | Industry | Sector | S&P 500 | |
|---|---|---|---|---|
| Revenue/Employee (TTM) | NM | 452,585 | 498,215 | 918,046 |
| Receivable Turnover (TTM) | NM | 6.25 | 7.96 | 10.31 |
| Asset Turnover (TTM) | NM | 0.54 | 0.80 | 0.95 |
Conclusion
Personally I believe the future of VMW is bright. It dominates the current market in virtualization, thanks to their easy to use and deployment. The maintenance is not expensive too since IT personnel can treat VMs to their physical machine counterpart. The stock price is a little bit expensive but keep growing. With this growing rate, target price of 120 shouldn’t be far away.
