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VMware Now On Microsoft’s Enemies List; UBS Ups Estimates.

VMware Now On Microsoft’s Enemies List; UBS Ups Estimates.

Microsoft (MSFT) CEO Steve Ballmer listed the company’s four biggest competitors as Oracle (ORCL), Apple (AAPL), Google (GOOG) and – surprise! – VMware (VMW).

Inclusion in that elite group is quite a vote of confidence in the importance of VMware’s server and desktop virtualization software. It’s also an indication of just how importance Microsoft is now placing on cloud computing.

Meanwhile, UBS analyst Brent Thill today repeated his Buy rating on VMW shares, lifting his price target no the stock to $75, from $64. While he noted in a research report that the stock is up 56% year to date through Wednesday, he thinks it is too early to step aside, asserting that strength in server shipments early in the year and increasing traction in helping customers manage data center operating expenses “should drive upside to estimates.”

Thill raised his FY 2010 EPS estimate to $1.32, from $1.30, on 34.3% revenue growth, up from 33.9%. For FY 2011, he now sees $1.58 a share, up from $1.50, on 17.5% revenue growth, up from 14.5%.

Thill points out that IDC recently reported 25.3% Q1 growth in x86 server units, far stronger than that the 15.4% growth UBS has been expecting. He says server momentum should continue through 2010, as CIOs reinvest in data center projects – and with virtualization penetration on servers only about 20%.

<Eric Savitz – Wall Street Journal>