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Better Than Expected Preliminary 2Q Results for VMware

We think investors should wait before purchasing shares of this narrow-moat firm.

Today,

VMware’s board of directors also approved a $1.2 billion expansion of its existing-share repurchase program, of which $900 million remains available, by an additional $1 billion stock repurchase authorization over the next 12 months, announced in January. The company also announced an offering of senior notes, the proceeds of which will be used to fund the share repurchase program, repay $1.23 billion promissory notes to EMC, and to use the remaining proceeds for general corporate purposes. In addition, VMware announced a mixed securities shelf offering for an undisclosed amount. Overall, we are maintaining our $80 fair value estimate for narrow-moat VMware. With shares rising 5% on the news, the shares are trading at a premium to our fair value estimate and we recommend potential investors to remain on the sidelines.

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About the Author

Ilya Kundozerov

Equity Analyst

Ilya Kundozerov is an equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers telecommunications companies.

Kundozerov has more than 15 years of experience in the field of information technology infrastructure. He has held IT positions in industries including local government, finance, retail, and advertising. He joined Morningstar in 2015.

Kundozerov holds a bachelor’s degree in electrical engineering from The Bonch-Bruevich Saint-Petersburg State University of Telecommunications in Russia and a master’s degree in business administration from Cornell University.

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