Needham & Company re-iterated their “buy” ratings on software-development companies VMWare (NSE: WVM) and CA Inc (NYSE: C), citing growth in both company’s cloud computing capabilities.
Needham analyst said, “During the past 12 months, both CA and VMware have been acquiring assets which are geared towards cloud based computing. The recent acquisition of Nimsoft by CA on March 10th has prompted us to review the strategies of both CA and VMware, as they build up their capabilities in cloud computing. Our key takeaway is this: both CA and VMware appears to be striving for a “one-stop-shop” model for cloud computing (create + manage), which is on track to be a $15B
market by 2016. Our viewpoint at a high level today is that VMware is increasingly perceived as a leader for creation of cloud applications. In our view CA looks positioned as an early mindshare leader in the management of cloud applications. In terms of financial impact, we believe VMware may prove our estimates too conservative for CY10 and CY11 as vblock and recent acquisitions drive more virtualization and cloud projects. Financial impact for CA is likely to be shown in additional bookings wins through FY11, as customers re-up contracts with CA and add-on “cloud-type” projects.”
Analyst added, “Shares of VMware recently traded at $53, and our $59 target is 38x CY11 $1.44 EPS and 8x EV/CY11 revenue. Shares of CA recently traded near $23, and our $27 target is 13x our $1.85 FY11 EPS estimate.”
