Tuesday, January 29, 2008

Early Morning Tidbits:

- Two firms defending VMware (NYSE:VMW) this morning:

*Citi reits Buy but lowers tgt to $83. Firm sees strong downside support for the stock at $50 which represents ~1x PEG on '08 EPS est. Considering this is the first time VMW has given guidance since coming public in mid-'07, they believe expectations are now set conservatively for VMW to exceed. While they acknowledge few near-term catalysts coupled with an upcoming share lock-up in two weeks creates added volatility, the firm believes the pull back in the shares represents a compelling opportunity for long-term investors.

*Jefferies recommends buying on today's weakness despite the Q4 revenue miss as they feel 2008 revenue and margin guidance looks conservative and that the company's broad themes remain sold. Firm lowered their target to $74 from $129.

- Two firms are cautious on VMware (NYSE:VMW) this morning:

*UBS says they view the company’s 2008 outlook suggests some of the following: 1) low hanging fruit may have been picked and new customer signings could be slowing down, 2) a decline in sales rep productivity or 3) investor exuberance that appears to have gotten ahead of the company post the upside posted in Q3. While their research suggests this is a top growth trend in software, in their view, VMware is now likely to be a ‘show me’ stock until 1Q08 numbers get posted in April

*Baird maintains Neutral rating following lower-than-expected Q4 results and 2008 guidance. Although they remain big believers in VMware's growth prospects longer term, they believe management's expectations of license revenue growth deceleration warrants a wait-and-see approach on the stock given macro uncertainty and potential pricing pressure. Firm would look to become more aggressive if 2008 guidance begins to appear overly conservative. Tgt $80.

Notablecalls: The pre-mkt action in VMW reminds me of AAPL yesterday. Meaning the oppy to buy comes after the open rather than in the pre mkt.

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