VMWare (NYSE:VMW) has seen a number of iterations over its long Silicon Valley history (a long history by tech firm standards, that is).
It was founded in 1998 in Palo Alto, California. Just a few years later, EMC — which is now a part of the Dell Technologies (NYSE:DELL) family — acquired VMWare, adding enterprise-level cloud-based platforms to the arsenal of a well-established tech firm. EMC had been a pioneer in the data storage space and then expanded into networked storage platforms.
VMWare Stock’s Long History
VMW stock started trading in 2007, as an adjunct to the slow and steady business that EMC had developed. VMW stock was the growth component for the future. Shortly after, Dell purchased Perot Systems for $3.9 billion to add some gravitas in the data storage space. Then Dell just kept growing.
In 2015, Dell Technologies purchased EMC. At $67 billion, it’s still considered the largest acquisition in the tech space. The move was to help Dell get more involved in the enterprise market since its personal computers business was changing as mobile and enterprise-level cloud computing were making their potential known.
By 2018, Dell was making headlines once again. It returned as a publicly traded company after six years as a private business and tried to manage a reverse merger between itself and VMWare — which it acquired through EMC. The deal didn’t happen and VMWare still remains an independent subsidiary of Dell.
The company is still controlled by Dell but it operates on its own. And given its recent activities, it is hungry to carve a niche in the enterprise cloud and hybrid cloud sectors.
What’s in Store for VMW?
Basically, there are public clouds like Amazon’s (NASDAQ:AMZN) Amazon Web Services, Microsoft’s (NASDAQ:MSFT) Azure and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google. And then there are private clouds, set up by companies that only allow employees to access them.
Now that the cloud is such a large part of many businesses, the hybrid cloud is becoming the next step. It allows customers to access the data they need through the public cloud and allows the company to share data from the private cloud or its data centers.
This is far more complex than it sounds and it takes a significant amount of security and engineering to work seamlessly.
And less than a week ago, VMW announced it was buying Pivotal Software (NYSE:PVTL), a cloud-based software and IT development firm. Dell already owns a big stake in Pivotal, and VMW owns some as well. This deal is a situation where one owner is buying the stake of the other owner, who in turn controls the buyer.
Once you work through that one, suffice it to say that VMW stock is looking to stake a claim in the burgeoning world of cloud-based systems.
The Bottom Line on VMW Stock
The stock is off 3% for the year but up 5% year-to-date. Some of the trouble has been the U.S.-China trade war and the fact that enterprise purchases are expected to slow. But VMW stock has been consolidating its position during this lull, which can be a good time to buy quality cheaply.
My Portfolio Grader rates VMW stock a “B” here. It’s a good value for a long-term growth investor but the short term may not be smooth.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.