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   Technology StocksVMware, Inc. (VMW)


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From: Glenn Petersen11/24/2019 11:31:36 AM
   of 354
 
‘Kubernetes’ Is the Future of Computing. That’s Bad News for One Stock.

By Tae Kim
Barron's
Updated Nov. 23, 2019 3:53 pm ET / Original Nov. 22, 2019 5:06 pm ET

Get ready to hear a lot more about Kubernetes. The Greek word for helmsman or pilot, Kubernetes is shaping up to be the next big wave in computing.

To understand the trend, let’s start with the changing dynamics of software in the cloud. Cloud apps increasingly run in aptly-named containers. The containers hold an application, its settings, and other related instructions. The trick is that these containers aren’t tied down to one operating system and can run nearly anywhere—across different servers and clouds. It’s how Google manages to scale Gmail and Google Maps across a billion-plus users.

Alphabet’s (ticker: GOOGL) Google long ago developed software called Borg to orchestrate its in-house containers—spinning them up and down as needed. In 2014, the search giant opted to make a version of Borg open source, calling it Kubernetes. Today, the major cloud providers all offer a Kubernetes option to customers.

This past week, more than 12,000 developers and executives gathered in San Diego at the largest annual Kubernetes conference called KubeCon. That’s up from just 550 attendees four years ago.

The conference goers are all looking for ways to take advantage of Kubernetes and its ability to automatically deploy, manage, and scale software workloads in the cloud. Ultimately, Kubernetes is accelerating the transition away from legacy client-server technology by making cloud-native software development faster and better.

Aparna Sinha, the director of product for Kubernetes at Google, notes that Kubernetes is built by the same team that created Borg. “We are quite confident in its ability and how it enables applications to run more reliably, more efficiently, and more affordably,” Sinha says. “Kubernetes has really taken off.”

Gartner says more than 75% of global companies will run containerized applications by 2022, from less than 30% today.

“As enterprises modernize their infrastructure and adopt a hybrid multicloud strategy, we see Kubernetes and containers rapidly emerging as the standard,” Jason McGee, chief technology officer of IBM Cloud Platform, told Barron’s in an email.

Of course, not every business is likely to benefit from a better cloud. VMware (VMW), a pioneer of virtualization software that allows a local server to run multiple workloads, could be the most at risk.

If Kubernetes accelerates the cloud shift, demand for on-premises software and equipment is likely to slow. This puts VMware’s core business at risk; its vSphere offering dominates the market for on-premises server virtualization software.

To be sure, VMware recognizes Kubernetes’ importance and is trying to catch up with the trend. In August, the company said Kubernetes has become “the largest generational shift in enterprise architecture in a decade.” At the time, it announced an agreement to buy Pivotal Software (PVTL) for $2.7 billion, saying it needed to own and control an end-to-end Kubernetes software platform.

But Wall Street analysts estimate that roughly half of VMware’s business still comes from its original virtualization business. The company says in filings that it will be a significant portion of revenue for the foreseeable future.

Google’s Sinha says the majority of companies she talks to are actively re-architecting their on-premises VMware-based workloads to the cloud. Kubernetes “is a huge threat to [VMware’s] business,” Sinha says. She argues that customers don’t get enough agility from their existing server virtualization setups.

As VMware rolls out its own Kubernetes effort, it faces a difficult reality. Each of the major cloud computing vendors— Amazon.com (AMZN), Microsoft (MSFT), and Google—offer their own Kubernetes offerings without any VMware software.

A recent Morgan Stanley survey of chief information officers showed VMware was one of the vendors most likely to lose market share as companies migrate workloads to the cloud over the next three years.

Citing a quiet period before its earnings report on Nov. 26, VMware declined to comment on its competitive positioning and potential pricing pressure.

A spokesperson said via email, “With our intention to acquire Pivotal, VMware will offer a comprehensive Kubernetes-based portfolio to help customers harness the full potential of Kubernetes and successfully build, run, and manage their applications and multicloud Kubernetes clusters.”

VMware shares are up 21% this year, slightly below the S&P 500’s return. The stock trades at 24 times adjusted earnings estimates for the next 12 months, above its five-year average of about 20 times, according to FactSet.

The current premium may be too rich, given the risk to VMware, as its customers transition to a cloud-native world. Analysts expect VMware to generate annual sales growth of nearly 10% in each of the next two years, but that forecast could be difficult to achieve if VMware’s vSphere sales fade.

History is littered with innovative companies that struggle to transition to the next technology. VMware may be making the right bet with Kubernetes, but its success in the new world is far from assured. If growth slows, its valuation multiple is likely to compress, leading to a significantly lower stock price.

barrons.com

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From: Glenn Petersen2/27/2020 10:38:18 PM
   of 354
 
VMware exceeds $10B in sales in FY 2020

zdnet.com

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From: OldAIMGuy5/29/2020 9:59:52 AM
   of 354
 
Sold 10% of my VMW position this AM at $155. It raised the cash reserve to an acceptable level after going to zero back in mid March with my last addition. Overall the position is up 23% since starting it at the end of February, 2020. Price/share is up 22% since the start.

OAG Tom

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To: OldAIMGuy who wrote (337)6/23/2020 5:05:17 PM
From: Glenn Petersen
1 Recommendation   of 354
 
Dell Explores Spinoff of $50 Billion Stake in VMware

PC maker is saddled with sluggish shares and heavy debt load

By Cara Lombardo
Wall Street Journal
Updated June 23, 2020 4:29 pm ET

Dell Technologies Inc. DELL 1.49% is examining options including a spinoff for its roughly $50 billion stake in VMware Inc. as the PC maker seeks to boost the value of its shares.

Dell recently kicked off a process to explore the possibility of unloading the stake in the cloud-software giant or taking other steps that could include buying the rest of VMware, according to people familiar with the matter. The companies are working with advisers, these people said.

It is also possible Dell will choose to do nothing. The review is at an early stage and no decision is imminent.

The goal of the review is to address a gap between Dell’s market value of roughly $36 billion and the value of its 81% stake in VMware, which suggests the market is assigning little or no value to Dell’s core PC and data-storage business. Separating the companies could help highlight the value of one or both businesses.


To the frustration of some Dell investors, the company’s stock has barely budged since returning to the public markets in 2018 despite a more than 50% rise in the tech-heavy Nasdaq Composite Index in the same period.

A transaction involving VMware, a major player in the fast-growing market for cloud software, could also be engineered to help Dell whittle down its $48 billion debt load.

Dell has recently organized working groups to explore various possibilities for the VMware stake. The primary option is a spinoff to Dell shareholders of the stake, some of the people said. Dell is assessing various implications of such a move, from corporate governance to capital structure and how the companies would work together following a separation, these people said.


Any such move is unlikely before next year. Dell can’t spin off its VMware stake tax-free until September 2021, or roughly five years after the PC maker combined with EMC Corp., because of a rule requiring both companies involved in a spinoff to have operated continuously for five years to qualify for such treatment.


Dell, founded by Michael Dell in 1984, went private in a 2013 leveraged buyout by Mr. Dell and private-equity firm Silver Lake. They undertook a complex financial move that returned it to the public markets five years later.

Dell shares closed at $48.29 Monday, compared with $45.43 on the first day of trading in late 2018. Dell finance chief Tom Sweet said in a June 15 blog post that the company’s priorities include optimizing its capital structure.

VMware has a strong position in the market for “hybrid” cloud, where large companies mix public cloud services, like those of Amazon.com Inc. AMZN 1.86% and Microsoft Corp., with their own private networks. It has a market value of around $62 billion.

Write to Cara Lombardo at cara.lombardo@wsj.com

wsj.com

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To: Glenn Petersen who wrote (338)6/24/2020 9:35:09 AM
From: OldAIMGuy
   of 354
 
Nice uptick this AM for VMW (on the news, I assume).

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To: OldAIMGuy who wrote (339)6/24/2020 9:44:26 AM
From: Glenn Petersen
   of 354
 
If Dell does decide to spin off VMware, it looks like nothing will actually happen until September 2021.

Any such move is unlikely before next year. Dell can’t spin off its VMware stake tax-free until September 2021, or roughly five years after the PC maker combined with EMC Corp., because of a rule requiring both companies involved in a spinoff to have operated continuously for five years to qualify for such treatment.

I have always felt that VMware would command a significantly higher valuation if it was an independent entity.

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From: Glenn Petersen6/26/2020 11:05:34 AM
   of 354
 
Dell and VMware’s strained marriage may finally be coming an end, and shareholders are cheering

Published Fri, Jun 26 202010:26 AM EDT

Alex Sherman @sherman4949
CNBC.com

Key Points

-- Dell has hired financial advisers to look into a variety of options for its 81% stake in VMware, and shareholders support a 2021 spinoff, according to people familiar with the matter.

-- Dell, burdened by a heavy debt load and strained U.S.-China trade relations, has struggled as a public company since returning to the market in 2018

-- Several of Dell’s largest shareholders, including Silver Lake and Elliott Management, are said to favor a VMware spinoff.



Michael Dell speaking at the 2019 WEF in Davos, Switzerland on Jan. 23rd, 2019.
Adam Galica | CNBC
----------------------------------

Dell and VMware have never been a perfect match. Now, some of Dell’s largest shareholders are hoping they split apart.

The two tech companies are, once again, working with financial advisers to determine the future of their unusual entanglement. Dell, which owns 81% of VMware, plans to explore a variety of strategic options, including a tax-free spinoff of those shares to Dell shareholders in late 2021, according to people familiar with the matter. Dell prefers that route to selling its stake so that it can avoid a multibillion-dollar tax hit, said the people, who asked not to be named because the discussions are private.

Dell shares, which have badly lagged behind the broader market, jumped more than 8% on Wednesday after the Wall Street Journal first reported on the renewed discussions. VMware climbed 2.4%.

The messy entanglement has infuriated many investors for years. Dell obtained its large stake in the virtualization software company through its acquisition of EMC for more than $60 billion in 2016. The rest of VMware has been owned by public shareholders since 2007, when EMC floated about 19% of the stock in an IPO.

Dell then returned to the public market in 2018 through a complicated reverse merger with a now defunct tracking stock that mirrored VMware’s performance within Dell. Its shares are since up 15% (thanks largely to Wednesday’s rally), trailing the S&P 500's 25% gain.

VMware, meanwhile, is down over that stretch, even though it has stronger margins and higher growth than the Dell and EMC businesses. Dell’s computer and server products, along with the EMC storage unit, have been hurt by a broad shift in computing to the cloud and the ongoing U.S.-China trade war, which has increased the costs for hardware components.

“The Dell ownership structure has been an albatross around the VMware story and ultimately causes the stock to trade at a discount, a dynamic that would be removed if Dell (and its Board) ultimately decided to head down this (spin-off) path,” wrote Daniel Ives, an analyst at Wedbush Securities, in a note to clients.

A spinoff in September 2021 is the most logical move by Dell, said three people familiar with the matter. Talks are in their early stages and it’s possible that the parties decide not to pursue a transaction, the people said.

Large shareholder approval

Several of Dell’s largest shareholders, including private-equity firm Silver Lake and hedge fund Elliott Management (whose 5.9% ownership in Dell is passive) favor spinning out VMware in September 2021, given the tax efficiencies and simplification to the capital structure, the people said.

Spokespeople at Silver Lake, Elliott, Dell and VMware declined to comment.

One possibility if a spinoff takes place is that VMware could pay Dell a large special dividend by taking on added debt and helping Dell reduce its heavy debt load, two of the people said. A similar transaction occurred in 2018, when VMware agreed to pay Dell a special one-time dividend of $11 billion in conjunction with taking Dell public.

Dell currently has about $45 billion in net debt, while VMware’s debt sits at only $3 billion. S&P Global, Moody’s and Fitch all rate Dell’s corporate credit quality as below investment grade. Dell could achieve investment grade status if it moves forward with the spinoff and associated dividend, two of the people said.

For VMware investors, the appeal of a breakup lies in the opportunity to finally operate entirely outside of the Dell-EMC empire, where the business has been stuck for 17 years.

VMware has a market value of more than $62 billion, valuing Dell’s 81% stake at about $50 billion. Yet Dell’s market value is only about $38 billion, for a company that generates more than $92 billion in annual revenue. That means all of Dell, excluding VMware, is valued at negative $12 billion.

Given the strained relationship with China, Dell’s financial picture isn’t likely to improve anytime soon.

“From a margin perspective, I would tell you that, look, part of this is going to depend upon what happens with the component costs as we go through the year and what the pricing environment and demand environment looks like,” Dell CFO Tom Sweet said on the company’s first-quarter earnings conference call last month. “Right now, we see the component cost environment as inflationary as we step through the rest of the year.”

While Dell has long coveted owning all of VMware, buying the remainder of the company is unlikely, four people said. The premium required to purchase the shares would most likely require Dell to take on even more debt. And keeping VMware’s stock independent is important to VMware employees, who want their equity incentives to be tied to a growth story.


Working in favor of an amicable outcome is the positive relationship between Michael Dell and VMware management, including CEO Pat Gelsinger, and their shared incentives the Dell founder is the VMware’s chairman and top shareholder. While there were tensions between EMC and VMware regarding strategic direction, Dell has supported certain VMware decisions even if they present a challenge for his company. For example, he favored VMware’s partnership with Amazon Web Services, according to a person familiar with the matter.

In 2018, after CNBC’s Jon Fortt suggested on Twitter that Gelsinger would be a good replacement for Intel CEO Brian Krzanich, Gelsinger responded that he was happy running VMware. Michael Dell chimed in a half-hour later, expressing support for Gelsinger, with an animated plaque reading, “You’re the best.”

Still, there are significant cultural differences between the companies. VMware, headquartered in Palo Alto, California, has needed to pay top dollar for talent to compete with other cloud-computing companies, while Dell, based in Texas, has a reputation for paying low salaries, three people said.

Another person said that when Michael Dell toured VMware’s Silicon Valley for the first time after the EMC acquisition, he compared the facility to Disneyland for adults. Dell noted that was eventually going to change.

A clean separation of the companies could clean up cultural differences while keeping Michael Dell as its largest individual shareholder.

— CNBC’s Jordan Novet contributed to this report.

cnbc.com

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To: Glenn Petersen who wrote (341)6/26/2020 11:18:41 AM
From: OldAIMGuy
   of 354
 
I've noticed VM Ware is starting to do Network TV advertising. I don't think I'd seen any such ads up until this last week.

It can't hurt awareness.

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To: Glenn Petersen who wrote (341)4/14/2021 5:38:56 PM
From: Glenn Petersen
1 Recommendation   of 354
 
Dell jumps as it unveils VMware stock spinoff plan

PUBLISHED WED, APR 14 20214:41 PM EDT
UPDATED WED, APR 14 20215:12 PM EDT
Jordan Novet @JORDANNOVET
CNBC.com

KEY POINTS

-- Dell will proceed with a plan to spin off shares of VMware in a deal that should happen in the fourth quarter.

-- Dell shares rose as much as 9% in extended trading on Wednesday after the company announced its plan.The move should help Dell pay down debt.

-- VMware has been somewhat constrained by Dell’s ownership to work with outside partners.
Dell shares rose as much as 9% in extended trading on Wednesday after the company announced its plan to proceed with the spinoff of its 81% ownership of enterprise software maker VMware. The deal should close in the fourth quarter of 2021.

The move isn’t a surprise. Dell is moving forward with a process it has long considered as a means of paying down its debt.

VMware will collectively distribute a cash dividend worth $11.5 billion to $12 billion to shareholders, including Dell, Dell said in a statement. Dell will receive $9.3 billion to $9.7 billion, which will position it well for investment grade ratings, the company said. Dell currently has a BB+ credit rating from S&P Global, giving the company a speculative grade, according to S&P Capital IQ.

When the deal closes, Dell shareholders will receive 0.44 shares of VMware stock for each Dell share, although the ratio could vary. VMware stock will take on a single-class structure after the deal as VMware class B shares become class A shares. Dell and VMware will continue a commercial relationship.

“We felt like this was beneficial for our shareholders because it eliminates a dual-class share structure, and it allows us to operate in broadened ecosystem,” VMware Chief Financial Officer Zane Rowe said in an interview.

Last year, Dell said it was considering a spinoff and that any deal would not happen before September 2021. CNBC reported last year that Silver Lake and other Dell shareholders supported the idea, partly for tax reasons.

Dell took on considerable debt through its 2016 acquisition of data storage hardware maker EMC, which acquired VMware in 2004 and later floated a small stake in the company in an initial public offering.

“After a comprehensive review of potential strategic options, both parties determined that this transaction will simplify capital structures and create additional long-term enterprise value,” Dell said.

Pat Gelsinger, who had continued to run VMware through the Dell acquisition, in February left VMware to run Intel, where he had formerly been a top executive. VMware shares moved 1% higher after Wednesday’s announcement.

VMware has been somewhat constrained to work with other companies due to Dell’s large ownership. Operating as an independent company will give VMware “more opportunities to have more partnerships with different companies,” Rowe said.

Story Link

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To: Glenn Petersen who wrote (343)8/26/2021 7:18:45 PM
From: Glenn Petersen
2 Recommendations   of 354
 
VMW is on track to become independent by the end of July.

VMware reports solid Q2 results with subscription and SaaS sales up 23%

The virtualization company published results slightly ahead of expectations, with strong growth in multi-cloud and modern applications businesses, along with End-User Computing.

By Stephanie Condon for Between the Lines |
ZDNet
August 26, 2021 -- 20:33 GMT (13:33 PDT) | Topic: Virtualization

VMware on Thursday published second quarter financial results that came in slightly ahead of market expectations.

The results, CFO Zane Rowe said in a statement, reflect strong year-over-year product bookings growth in major categories. That includes VMware's multi-cloud and modern applications businesses, along with End-User Computing.

The company's non-GAAP net income for the second quarter was $739 million, or $1.75 per diluted share. Revenue in Q2 was $3.14 billion, an increase of 9% from the second quarter of fiscal 2021.



Mware,Analysts were expecting earnings of $1.64 per share on revenue of $3.1 billion.

"Our customers are evolving their strategies from a 'cloud first' to a 'cloud smart' philosophy where they are picking the right clouds and cloud services for the right workload, and turning to a multi-cloud environment," CEO Raghu Raghuram said in a statement. "We are delivering the multi-cloud platform for all applications, enabling the digital innovation and enterprise control that our customers need to accelerate their businesses today and in the future."

Raghuram took the helm as VMware's new chief executive on June 1, six months after Pat Gelsinger's departure to Intel. Prior to that, Raghuram was chief operating officer of products and cloud services for VMware.

Meanwhile, VMware and parent company Dell Technologies are in the process of splitting into two independent companies. The long rumored spin-off was formally announced by Dell Technologies in April, and it's on track to be completed by November.

Breaking down the Q2 results, services revenue came to $1.62 billion, while license revenue was $738 million.

Subscription and SaaS revenue came to $776 million, an increase of 23% year-over-year. Subscription and SaaS annual recurring revenue (ARR) for the second quarter was $3.15 billion, an increase of 26% year-over-year.

Subscription and SaaS accounted for 24.7% of total revenue.

Non-GAAP operating income for the second quarter was $924 million, a decrease of 3% from a year prior.

Operating cash flow in Q2 was $864 million. Free cash flow was $777 million.

For the third quarter, VMware expects revenue of $3.12 billion.

VMware reports solid Q2 results with subscription and SaaS sales up 23% | ZDNet

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