VMware Licensing Shift brings Increment in Company’s Shares

VMware share gets upped and the ratings are raised by two analysts from Credit Suisse and Collins Stewart, depending upon the new licensing change strategy the virtualization software providing company has come up with.

Analysts from Credit Suisse and Collins Stewart upgraded the VMware shares and as a result the ratings on the software provider for virtualization went up. First, coming to the Credit Suisse analyst, Phillip Winslow; he raised his price target from $100 to $115. Winslow must have seen some incoming benefit for VMware to have raised the bar higher and this advantage might account to the company’s software licensing model shift. Increasing his rating on the stock to Outperform from Neutral, Winslow commented in his research, ‘With the recent introduction of VMware vSphere 5, VMware changed vSphere’s licensing to be based on consumption rather than physical server components.’

Winslow also explained in his study that licensing entitlements based on CPUs per server with a vRAM entitlement were explicitly replaced by VMware which as the analyst puts it is ‘the total amount of memory configured to all VMs in a customer’s environment.’ Talking about vSphere 4, the model was not able to generate license revenue for VMware and was rather disapprovingly leveraged to Moore’s Law. But with vSpehere 5, there is more hope for a long term increment in the license revenue, as the research directs in favour of this licensing change. Keeping aside the fact that Wall Street has not experienced the vSphere 5 licensing change very well, the analysis proves to be optimistic about the new license strategy.

Coming to the second analyst, Louis Miscioscia from Collins Stewart, he retained a $108 price target and raised his rating to Buy from Neutral. Miscioscia wrote, ‘Longer-term changes are exactly what are needed to ensure future revenue streams that reflect actual customer usage of VMware.’ Like Winslow, he is also pleased with the licensing change brought by VMware. In relation to the upcoming VMworld conference in Las Vegas, Miscioscia added that the provision of mini-catalysts could depend on incremental product announcements, possible tuck-in M&A and positive commentary. Lastly, it was also noted that VMware is currently up $3.69 to $94.35.

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  3. VMware makes it big: introduction of vSphere…a milestone in virtualization!!
  4. VMware Launches vSphere 5 & Cloud Infrastructure Suite
  5. TrainSignal Launches VMware Security Design Training
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