- JPMorgan's John DiFucci, who upgraded VMware (VMW +3.4%) to Overweight this morning, observes the percentage of x86 server CPU capacity being used to power virtualized servers (34%) is well below the percentage of x86 server workloads that have been virtualized (75%).
- While the latter figure (or similar ones) has been used to back up arguments the virtualization software market has become saturated, the former one is arguably more relevant to VMware, given the company charges for its mainstay vSphere virtualization platform on a per-CPU basis.
- VMware shares were pressured earlier this year in large part due to concerns about slowing vSphere license growth. Aside from saturation, investors have also been on edge about share losses to Microsoft's Hyper-V (recently declared by Microsoft to be growing 3x as fast as vSphere).
- Both VMware and parent EMC (EMC +1.9%) got a lift from the upgrade. VMware shares remain down 14% YTD going into Monday's Q3 report.