Microsoft Putting a Dent in the VMware Story

By Justice Litle

VMware (NYSE: VMW) is a sexy tech company that made investors a lot of money on the way up. It had a huge IPO in 2007 and climbed to lofty heights.

But a few weeks ago, my friend Cash McDash called out VMW as a strong potential short play. (You can verify the call for yourself. See “This High-Tech Darling Could Crash and Burn.”)

In recommending a short in the $65 area, Cash noted (among other things) that competitors could put a big dent in the VMware story.

Sure enough, one of the biggest and baddest competitors showed up a short time later… none other than Microsoft. News that Microsoft (NASDAQ: MSFT) will be offering a competitive product — at a sharply lower price, no less — has sent VMW shareholders running for the exits. The stock probably has further downside ahead.

This kind of thing happens a lot to hot new issues. Six to twelve months after the IPO, reality comes barging in. If it’s not a bruising competitor like Microsoft, it’s something else that pours cold water on the enthusiasm. You see it a lot with glamor stocks that get ahead of themselves.

As a new-issues trader who goes both ways, my friend Cash McDash loves these situations. He’s got an eagle eye when it comes to spotting high-flier short setups.

If you don’t mind dabbling on the “dark side”… or if you just want an early warning on some of the high-profile longs in your portfolio… you should keep tabs on what Cash has to say. Stay tuned for more on that front soon.

Source: When Microsoft Attacks!

Disclosure: none

Comments

[Dennis Byron]

Whoa, catch your breath there Justice! The news that Microsoft had a hypervisor product coming out this year is about three years old! Better go back and ask your friend what his or her real reason was for shorting VMW.

[IT Guy]

While I haven't played with Microsoft's hypervisor product, what I've read is that it pales in comparison to the product that VMWare offers. I use VMWare everyday in my job as an IT professional. VMWare ESX servers ability to shift virtual servers among a "cluster" of physical servers automatically in response to physical server hardware failure or to gain optimal performance for the virtual machine is not available in Microsofts Hypervisor product. This basically means I can't use it for anything else besides playing around. Sorry Microsoft, you aren't there yet. Maybe in 5 years or so you'll be ready....

[User 225128]

You better check your facts first before you start making those assumptions. We all know what it means when you break apart "Assume"! (You make and @ss out of U and Me)
The MS Hyper-V solution is competing with the VMware solution that came out in 2004. This product is a "1st Generation" product and the VMware VI3 solution is coming into it's "4 Generation". Your insight is like comparing Windows NT to Windows 2008.
We have been on the beta program with MS and VMware and have installed this in our environment from the beginning (we are a Fortune 10 company) I can tell you our go forward strategy is VMware. [I say this even as a Microsoft supporter in general]