Dennis Byron

The Short Case on VMWare

...but at least the 3Com shareholders got something. Can't say the same for EMC's

EMC: A Great Way To Profit From VMWare

You would think EMC's market cap would have started reacting as soon as it announced the VMware IPO "spinout" in February, never mind after the actual VMW launch. That's what the theory says. But there are other theories that say something like markets look ahead and markets reflect the cumulative wisdom of the buyers and sellers.

EMC is lanuguishing because those in the know know "virtualization" is a buzzword du jour, today's "dot.com." At an Infoworld conference in NYC yesterday, Stephen Hilton, an IT guy at Credit Suisse (which is doing a big server virtualization project) was asked if virtualization would take over the world in five years. He said the word virtulization "would drop out of the vocabulary in three years." I understood his point to be that this was nothing new and just the way IT infrastructure needs to be built. IBM has had it for 40-50 years on mainframes; it was only a matter of time for it to be used on PCs. It will be built into every type of software.

And the buzz about desktop and application virtualization is equally absurd. We EMC shareholders were screwed because we did not get a piece of VMW right away that we could unload during this "virtualization bubble."

Dell, Sun Could Suffer As Virtualization Business Picks Up

There are some arithmetic issues in this prediction that I don't get. A "modest contraction" of server growth rate in 2009 is a lot different than no increase in the "server installed base" after 2008. The latter would not be a modest contraction, it would be a catastrophic drop to near zero in absolute number of units shipped.

But it doesn't matter. It sounds like the quote Watson Sr. supposedly made in 1940s: "'I think there is a world market for maybe five computers.' Virtualization has been around since the 1960s and it hasn't caused this effect yet. It is unlikely to start having this effect in 2009. Server virtualization is a SaaS farm play (and a useful form of increased efficiency). But tech analysts should forget "agriculture" and conisder the home.