If you’ve been waiting to jump on the cloud-computing bandwagon and buy shares on the cheap in a time when hardly anything in the tech sector is oversold, I’ve got good news. A truly under-the-radar cloud-investing opportunity, VMware (NYSE:VMW) is trading at a discount right now and I’m fully expecting VMware stock to ride the cloud back up to its $200+ high-water mark.
This is a company in the hybrid cloud space, which people typically associate with IBM (NYSE:IBM). If VMware can make inroads and steal some of IBM’s market share, however, a new hybrid-cloud king might be crowned within the next year or two.
In other words, if you’ve never heard of this company, I have a feeling you’ll be hearing a whole lot about them pretty soon, and by then, the share price could be much higher.
Hybrid-cloud Services for Any Occasion
VMware isn’t a household name or an American institution like its more famous hybrid-cloud competitor, IBM. Nevertheless, VMware poses a serious threat to IBM in this niche as its hybrid-cloud offerings are robust and, I dare say, more comprehensive than IBM’s.
I don’t want to turn this into ad copy, but I’m really blown away by VMware’s full suite of hybrid-cloud services. Clients can mix and match from a veritable panoply of offerings in this department, including the public cloud platform VMware vCloud Air, the data-center virtualization platform VMware vSphere, the network virtualization platform VMware NSX, the storage-allocation solution VMware Virtual SAN, and more.
The company’s crown jewel of the service lineup, though, is the all-in-one synthesis of hybrid-cloud solutions known as VMware vRealize.
Billed as “The leading cloud management platform purpose-built for the hybrid cloud,” vRealize provides “a unified management experience” inclusive of both physical infrastructure and external clouds.
I’ve written extensively on IBM before and honestly, I haven’t seen anything from them quite like what VMware has to offer in the hybrid-cloud space. It’s weird to think of a capital-rich firm like IBM playing catch-up with a relative upstart, but I suspect that VMware’s sheer ambition could drive some big clients to the newer (and frankly, bolder) company.
Acquisitions and Expansion
Besides the company’s impressive array of hybrid-cloud service offerings, another reason to consider VMware stock is the firm’s growth-oriented vision. This is backed up not through words as much as action, as VMware is quickly acquiring value-added companies in the tech space. We can begin with VMware’s $550 million buyout of 2-year-old native-cloud-solution provider Heptio.
As Enterprise Strategy Group’s senior analyst for cloud services and orchestration Edwin Yuen duly opined (and I concur), “Heptio’s strong enterprise portfolio and customer penetration makes it a very good fit for VMware’s Cloud Native team and certainly worthy of the price paid.”
Next up is VMware’s acquisition of Bitnami, a package application company with the capacity to deliver over 130 software packages in a multiplicity of formats. Circling back to the hybrid-cloud topic, the company explained that, “Bitnami will enable our customers to easily deploy application packages on any cloud — public or hybrid.”
Next up is a real headline grabber: VMware’s buyout of Pivotal Software, which carried a hefty $2.7 billion price tag. I feel it’s well worth the price as Pivotal is, if I may say so, pivotal in the cloud-native platform-provider space. Then, just a few weeks later, VMware declared its intention to acquire Nysana, a known leader in the area of AI-focused network-analytics software.
Sanjay Uppal, who serves as a VMware vice president and general manager, explained the added value of the latter acquisition, stating, “Nyansa is a proven solution that solves many of the shortcomings of today’s vendor-specific solutions… [The company] currently analyzes user network traffic from more than 20 million client devices across thousands of customer sites.”
The Takeaway on VMware Stock
Frankly, I’m surprised that VMware stock continues to trade at a price-to-earnings ratio of around 9.5 and remains well below its all-time high of slightly more than $200 per share.
Given the company’s potential for expansion – bolstered by a stellar product lineup and an ambitious but measured penchant for value-enhanced strategic acquisitions – there’s no time like the present to start a position in tomorrow’s hybrid-cloud dominator: not IBM, but VMware.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.