Can VMware, Inc. (NYSE:VMW) Ride The Cloud Computing Wave?

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VMware, Inc. (NYSE:VMW) is poised to benefit from sustained growth of the global cloud computing market, according to Trefis analysts. In the cloud computing industry, VMware is mainly focused on the Infrastructure-as-a-Service (IaaS) sub-segment. IaaS is expected to grow faster than any other cloud computing component between 2014 and 2016.

While the whole cloud computing market is expected to expand at compound annual growth rate (CAGR) of 15% from 2014 and 2016, IaaS is expected to grow at CARG of 35%. But that will only be the beginning. Another market intelligence models that IaaS will expand at CARG of 29% in the coming five years.

Is VMware ready for the opportunity?

According to Trefis, IaaS is growing rapidly at a time when VMware, Inc. (NYSE:VMW) is also witnessing spike in the demand for its maintenance and services offerings, which are part of the IaaS sub-segment. Therefore, the company is well-positioned to ride the wave.

VMware, Inc. (NYSE:VMW)’s swelling maintenance and services revenue is helping in offsetting the company’s shrinking software license sales. According to Trefis, IaaS is increasingly appealing to enterprises of all sizes, thus creating a situation where demand for maintenance is soaring. Therefore, VMware’s services revenues are expected to continue growing at a steady pace over the coming years.

$4.5 billion by 2020

Citing the steady growth, Trefis models VMware, Inc. (NYSE:VMW)’s maintenance revenue to hit $4.5 billion by 2020, indicating CARG of more than 7%.

Taking advantage of cloud computing

Cloud computing is enabling enterprises to operate more efficiently and that explains the growing demand. With strong roots in system virtualization, expanding into cloud computing and especially IaaS was a natural move for VMware, Inc. (NYSE:VMW).

IaaS is projected to grow to $22.4 billion this year, and expanding at CARG of 29% to reach about $62 billion in the next five years. VMware, Inc. (NYSE:VMW)’s maintenance revenues on the other hands are expected to hit $3.5 billion in 2016 and expand further to $4.5 billion by 2020.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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