VMware (
VMW
) competes with Microsoft (
MSFT
) and Citrix (
CTXS
) in the virtualization market, which it leads with around
45% share globally. As server virtualization becomes increasingly
popular and the benefits offered - less power consumption, space
optimization, greater capacity utilization and cost effectiveness -
become indispensable to businesses, VMware is likely to
benefit going forward.
The percent of servers that have been virtualized has increased
from around 5% in 2005 to around 14% currently led by
multiple benefits of virtualization in terms of ease of use and
lower costs, greater interoperability in virtualization, and
falling prices and improved functionality. These trends are going
to benefit companies like VMware.
While we expect the percent of virtualized servers will continue
increasing to 27%, the Trefis members expect a higher level of 40%,
translating to an upside of 43% to our price estimate for VMware
stock.
We currently have a
Trefis price estimate of $89.24 for VMware's
stock
, which is about in line with the current stock price.
Benefits of Virtualization
VMware's server virtualization technology decouples the software
from the underlying hardware, enables aggregation of multiple
servers, storage infrastructure and networks into pools of
resources that can be delivered dynamically, securely and reliably
to applications as needed.
Demand for Interoperability Increasing
There are already a number of initiatives to make managing
multiple Virtual Machine (VM) vendors easier. Novell's ZENworks VM
Manager and Orchestrator products are just one of many products
that will offer a way to manage more than one vendor's hypervisor,
or virtual machine monitor (
VMM
).
Microsoft (with its System Center software), CA and others have
announced plans to support both Microsoft's and VMware's
hypervisors, while Novell will support Citrix's solution. The
eventual goal of these standards is to provide hypervisor
interoperability, such as by taking a VM image built on the
Microsoft Hyper-V hypervisor and running it on a Citrix XenServer
hypervisor without having to modify the VM's configuration.
Server Prices Falling, Functionality Improving
Most free products like Microsoft's Virtual Server line continue
to be a great way for enterprises to become familiar with VM
technology. VMware has introduced support for 10 Gigabit Ethernet
(10GE) networks and larger memory and disk support with its latest
version. Citrix has also boosted the performance of XenServer
especially when it comes to XenServer working with the company's
flagship Presentation Server product line.
Member Forecast
The Trefis community forecasts that Percent of Servers
Virtualized will increase from 21% in 2011 to around 39% in the
coming years, compared to the baseline Trefis estimate of an
increase from about 16% to 28% during the same period. The member
estimates imply an upside of 43% to the Trefis price estimate for
VMware's stock.
Our
complete analysis for VMware's stock is here
.