Speaking to analysts today in Boston, EMC chairman and CEO Joseph Tucci said his company has "no intention of selling more of VMware." EMC now owns 86 percent of VMware, even after the latter’s obscenely successful IPO last August.
Tucci’s confirmation that EMC intends to keep its current stake in VMware speaks volumes. Above all, it indicates that EMC believes VMware is well positioned competitively despite adversarial forays by Dell, Oracle, Citrix, and Microsoft. Tucci stressed that VMware is preparing to release its fourth-generation virtualization product while most of its competitors are just entering the market.
That might be true, but VMware will have to stare down some daunting competition, and margin pressure will be inevitable. My guess is that Tucci and his lieutenants fully expect VMware to lose at least some of its ludicrously dominant market share. At the same time, they have calculated that VMware will remain the leading player in virtualization for the foreseeable future.
With a market capitalization of approximately $35 billion — not far behind EMC’s own market capitalization of $41.7 billion — VMware remains a solid investment for Tucci. Since EMC clearly isn’t in financial distress, expecting to see steady growth of its own as a result of a 60% compound annual growth rate (CAGR) for computer storage, there isn’t an urgent need for EMC to unload its VMware shares.