Mizuho Securities‘s Abhey Lamba this afternoon kicks off coverage of EMC (EMC) with a Buy rating and a $34 price target, writing that the company should benefit from a “major product refresh” and from continued contributions by VMWare (VMW), in which EMC holds an 80% stake.
On the product side, Lamba notes the recent introduction of “VFCache (Project Lightening)” for server acceleration “Iomega StorCenter PX Server Class” for small business storage; and “Greenplum Database 4.2″ for the so-called Big Data movement and “Hadoop” systems. He’s looking forward to another version of the company’s “VMAX” product later this year, as well as new versions of the “Data Domain,” “Avamar,” and “Isilon” product lines.
As far as VMWare, which contributed to three points of revenue growth for EMC in the course of the last five years, Lamba expects the company to continue to deliver revenue and earnings and cash flow for EMC. However, it is transitioning from sales of its “hypervisor” software to more of a focus on management software:
The company�s management tools currently represent about 10% of its license bookings, but their contribution is growing rapidly. Given VMware�s installed base, there is a significant opportunity to sell management tools to its customers. Having said that, we believe that the upcoming release of Hyper-V from Microsoft needs monitoring as it offers the potential of becoming an alternative to VMware�s offerings. Initially Hyper-V will likely gain traction in the midmarkets. Additionally, it remains to be seen when Microsoft�s solutions will become good enough for production usage within enterprises.
EMC shares today rose 14 cents, or half a percent, to $29.85. VMW shares rose 13 cents to $114.53.
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