VMware Inc. (VMW - Free Report) annual VMworld developer and customer show recently started (Aug 25, 2014) at the Moscone Center in California. As anticipated the company has already announced a bunch of new products and a handful of strategic partnerships in the four-day-long show.
The strategic partnerships include the likes of AT&T (T - Free Report) , Google (GOOGL - Free Report) , Dell among others. VMware announced a strategic alliance with AT&T, which will allow customers to quickly connect to VMware VCloudAir using the telecommunication provider’s Multi-Protocol label switching based private network solution.
Along with Google, Docker and Pivotal, VMware will enable enterprises run and manage their container-based apps across private, public and hybrid clouds. VMware and Dell are collaborating over the Cumulus Networks to deliver the VMware NSX network virtualization platform with Cumulus Linux on Dell networking switches.
VMworld 2014 also witnessed the unveiling of VMware integrated OpenStack. This new service will be released in 2015. Organizations that have an OpenStack cloud set up at their back end will be able to manage the same by using VMware’s tools. Additionally, VMware and VCE expanded their strategic partnership to integrate their hybrid cloud services.
We believe that these new products and strategic alliances will improve and diversify the company’s product offerings, thereby driving top-line growth amid intensifying competition from Microsoft (MSFT - Free Report) , Hewlett Packard (HPQ - Free Report) and Citrix (CTXS - Free Report) in the long run. Sluggish IT spending environment also remains a concern.
This heightened level of competition is forcing VMware to spend more on research and innovative product development, which is driving up costs. Additionally, continuing investments in emerging markets and on acquisitions are expected to further ramp up costs, which will keep margins under pressure.
Nevertheless, VMware’s strong product pipeline positions it well for overall growth. The was recently recognized by market research firm IDC, which placed it as the #1 in both worldwide cloud systems management software and worldwide data center automation software.
We believe that the new partnerships coupled with continuing contract wins will improve market share in the near term. Robust international sales and the acquisitions of Desktone, AirWatch and CloudVolumes will also add to the top line in the long run.
Currently, VMware has a Zacks Rank #3 (Hold).