VMware Stock Price Down

VMware's stock price was down today by more than $28, from yesterday's closing price $83 to below $55.

I feel for VMware's share holders and employees. As an individual investor and a member in the job market, I know how that hurts and how much this affects the morale of an IPO company. On the other hand, I felt a little vindicated about my recommendation to a friend last year. Last year, this friend of mine received multiple job offers from several companies. In the Valley, job offers most likely come with stock option as part of the package. My friend polled my opinion on those offers and I rated VMware the last. At that time, VMware was ready to go IPO in a month.

Though my analysis included both the factors regarding VMware and the individual, it was my opinion toward VMware's product contributed to the recommendation. Virtual machine software as it being sold by VMware is a product for cost-cutting. It is aimed to cut cost for maintaining data centers for both ISP and enterprise. Eventually, the revenue and adoption have to increase at the expense of sales price and profit margin. As it does not create value for its customers, VMware's customers will only ask how much more they can save. At the same time, the competition is fierce in the same market segment. Just to name a few: Citrix bought XenSource; Google bought a start-up to do its own virtualization, and a few open source projects are in action. I always wondered why VMware's stock enjoyed a P/E ratio of multiple hundreds.

It is projected that VMware will achieve an annual revenue of $2 billion by end of 2008. If VMware will enjoy a ratio of market cap to annual revenue at between 7 to 10, the highest market cap it can get in 12 month is about today's value, 21 billion US dollars. Nevertheless, it is a profit-making company with growing prospect. Except for the hype and stock price, it is a respectable company in most aspects. Compared with VOIP companies, which also offer cost-cutting products with fierce competition but little revenue, VMware is delivering share holder value with no doubt.

MacBook Air

Apple introduced an ultra-light laptop, MacBook Air, at MacWorld Expo on January 15, 2008.

Apple is bucking the popular trend on this. Before the MacWorld Expo 2008 started, there are rumors about an ultra-light laptop to be announced. Some blogs or articles made a connection to UMPC or Internet tablet like products. The rumor became true that there is an ultra-light laptop announced. Surprisingly, it is in the form of a traditional laptop, only much lighter and thinner. It is unlike UMPC's from Sony, Samsung, or OQO, or Nokia's Internet Tablet. It is Apple's way to tell the world that Apple does not believe in UMPC or UMPC in that form factor.

Display	13.3 LCD widescreen
Processor	1.6 GHz Intel Core 2 Duo, optional 1.8 GHz (specially made for Air)
Memory	2GB DDR2 SDRAM
Networking	AirPort Extreme 802.11a/b/g/n, no wired Ethernet
Camera	Built-in Camera
Battery	37 W-Hr Lithium-polymer with 5-hour run-time
Dimension	22.7 x 32.4 x 0.4~1.94 cm (8.9x12.74x0.16~0.76 in)
Weight	1.36 Kg (3.0 lbs)

Some people think MacBook Air is expensive. I did a product search on laptops and I think it is a fairly priced product. Look at the products below.

Sony TZ series - starting at $2100 (1.06 GHz Intel Core 2 Duo, starting at 2.8 lbs)
Toshiba R500 - starting at $2000 (1.2 GHz Intel Centrino Duo, starting at 2.4 lbs)
Lenovo/IBM Thinkpad X61 - starting at $1200 (1.6 GHz Intel Core 2 Duo, starting at 2.7 lbs)

Only Lenovo's X61 is competitive in terms of the price and form factor combination. HP, Gateway, and Dell do not have anything close to 3 lbs.

Come to think of it, Apple does have an Internet tablet and that is iPod Touch. It was a very loud claim with real products saying "We, as Apple, believe that is the way to go." No matter what Apple believes, from the view point of form factor, there is a gap from iPod Touch to MacBook Air. UMPC industry may have the form factor right but did not quite get the usability straightened out. Nevertheless, MacBook Air is a good inspiration to the industry though it stole the thunder from everyone else. I am hopeful that someone will get it right given so many players in this field. But for anything usable to appear, it will probably be some time next year or even 2010.

U.S. Monster Employment Index of December 2007

The US Monster Employment Index for December 2007 was released on January 03, 2008. The number, 169, came in as a surprise to me.

In my previous blog, I predicted "another dip for December", since we have been observing consistent Novermber-to-December decreases since the inception of the index. I was thinking something around 175 given the weakness of November. Though only a difference of 3.4 percent, I would not dismiss it as white noise.

This morning, Mr. Bernanke said that Fed "must remain exceptionally alert and flexible" and "In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary". All of this is expected except when the rate cut and how deep it will be.

I am still thinking the same way as I logged in last month's blog that Mr. Bernanke has all he can muster to land the economy softly. In the Valley, a down turn may give the Web bubble a chance for reality check. It can be the silver lining that goes a long way.