On Tuesday morning, data storage specialist EMC
Predictably -- well, to some degree at least -- both stocks jumped on the news. I'm also not shocked to see VMware bouncing higher than EMC. That's what smaller stocks do, after all: EMC's Beta value -- a metric that tracks how much Pepto-Bismol you need on hand to own a stock -- is an absolutely average 1.0, while VMware's is a hiccup-inducing 1.9. Plus, investors might have just liked VMWare’s earnings more than EMC’s consolidated offering. However, the discrepancy also reveals another simple fact between the companies: EMC is easier to understand for the average investor or money manager.
EMC's storage business is well understood and large in scale and scope. There's established competition in the field from the likes of IBM
VMware is a very different beast. Twelve years of operating history sounds big, but the very concept of virtualization that forms VMware's bread and butter only recently hit the mainstream. You probably didn't know what VMware was five years ago, and might still have a foggy notion of virtualization. (Don't worry -- we've got a few primers on the idea right here.) When Microsoft
It's no wonder, then, that there's a lot of guesswork when analysts and investors try to figure out what VMware's stock is worth, even though it's basically just a tracking stock for EMC's virtualization division. That's why EMC's stodgy stock is for safety-craving value investors while VMware is a Rule Breaker that appeals to high rollers and long-term visionaries. If you can't handle the VMware roller-coaster ride, you're probably better off with EMC or IBM.
Which kind of investor are you? Discuss the relative charms of EMC and VMware in the comments below.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. If he did, it would probably be VMware. Microsoft is a Motley Fool Inside Value recommendation. VMware is a Motley Fool Rule Breakers selection. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.