Tomorrow will be the most important day in the history of VMware (NYSE:VMW).
Top managers will be talking up the company's strategy to institutional investors who now have a right to feel nervous.
VMware has dominated the virtualization space with its vSphere virtualization system, but as the action moves into the more complex area of private and hybrid clouds, the company is being squeezed on two sides.
IBM is the more existential threat. That's because inside its OpenStack offering is KVM, a hypervisor that competes with VMware's own. Along with Red Hat (NYSE:RHT), with whom it's been working on Linux for over a decade, IBM recently released a collection of benchmark tests claiming superiority over VMware's own offerings.
On the other hand, VMware has been teasing an alternative public cloud service to AWS for months now. Big stock buyers want to know which way VMware is going - against Amazon, against IBM, or against both?
Any one of these answers could lead to skeptical responses from VMware's audience, at a time when the stock is vulnerable. The stock price fell about 20% in January, following an earnings report that came in below estimates and included discussion of lay-offs and consolidation of businesses.
That news, however, should have been welcomed. Having VMware more focused on cloud makes enormous sense, given the size of the opportunity and the threats the company faces. But whether the company succeeds in cloud remains open to question, and VMware stock faces a rocky road over the near term.
It may be time to look for an exit. Unless, of course, you like roller coasters.
Disclosure: I am long IBM, RHT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.