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When Superstars Falter

If tennis ace Roger Federer were a tech company right now, he might be VMware. Long the dominant player in his sport, he got <a href="http://seattlepi.nwsource.com/othersports/3001ap_australian_open.html">a nasty dose of reality</a> at last week's Australian Open. Hang on and let me torture this sports metaphor just a little longer -- likewise, <a href="http://www.thestreet.com/s/the-partys-over-at-vmware/newsanalysis/techstockupdate/10400943.html">VMware got knocked off its do-no-wrong perch</a

Terry Sweeney

January 29, 2008

2 Min Read

If tennis ace Roger Federer were a tech company right now, he might be VMware. Long the dominant player in his sport, he got a nasty dose of reality at last week's Australian Open. Hang on and let me torture this sports metaphor just a little longer -- likewise, VMware got knocked off its do-no-wrong perch after Monday's earnings report and its forecast about inroads by the competition.VMware's share price was off more than 30% Tuesday, closing at $54.87, less than half of the $125 high it hit right after its August 2007 IPO. The reason behind this erosion? In part, it was due to VMware missing fourth-quarter revenue targets. So instead of 82% growth, the vendor checked in with a paltry 80%.

How many companies would love to have that problem?

That wasn't the whole story, though. More troubling to the market was VMware's forecast that growth might tumble down to around 50% this year, given a generally softer economy coupled with some real competition in the virtual machine space from Oracle and Microsoft.

EMC, which owns 85% of VMware, released its own earnings, with strong 4Q07 and CY07 results -- both up 19% over the same period a year ago. Click to the bottom of this story to see why CEO Joe Tucci is completely unfazed by this big burp in the virtualization market.

VMware execs also said Monday their model going forward doesn't include price cutting on existing products, but rather, adding new features to them. After checking out this blog entry from one of VMware's product development directors, it's pretty safe to conclude that lots of new management features are coming down the pike in 2008 to improve on the virtual appliance experience, and to resolve changes in the way virtualization subverts traditional network and system management thinking. Something tells me these features may have just gotten fast-tracked, given all the market turmoil.

Like in tennis, there's always another day to play. As with Federer, none of VMware's competitors have written anyone off. Both sets of opponents sense an opening. Tomorrow's headlines will be filled with how they exploit it.

About the Author(s)

Terry Sweeney

Contributing Editor

Terry Sweeney is a Los Angeles-based writer and editor who has covered technology, networking, and security for more than 20 years. He was part of the team that started Dark Reading and has been a contributor to The Washington Post, Crain's New York Business, Red Herring, Network World, InformationWeek and Mobile Sports Report.

In addition to information security, Sweeney has written extensively about cloud computing, wireless technologies, storage networking, and analytics. After watching successive waves of technological advancement, he still prefers to chronicle the actual application of these breakthroughs by businesses and public sector organizations.

Sweeney is also the founder and chief jarhead of Paragon Jams, which specializes in small-batch jams and preserves for adults.

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