Why VMware Shares Jumped

Is this meaningful, or just another movement?

Evan Niu
Evan Niu, CFA
Mar 13, 2013 at 4:19PM
Technology and Telecom

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of VMware (NYSE:VMW) have jumped today by as much as 10% after the company announced plans alongside parent company EMC (NYSE:EMC) to spin off a business unit.

So what: The two companies said they will create a Pivotal company that will include VMware's Cloud Foundry service as well as EMC's Greenplum data analytics software offerings. Pivotal, which EMC acquired last year for an unknown price, will target big data trends in the enterprise. VMware also said it was targeting 20% annual revenue growth by 2016.

Now what: EMC CEO Joe Tucci said that Pivotal could "potentially" be an acquisition target, but that'd be in the distant future. Pivotal is nowhere near ready to do an IPO, and while that is the intended end result, it's still far away. Factoring in the Pivotal announcement, VMware said revenue this year is expected to be in the range of $5.12 billion to $5.24 billion.

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