Big Losers today: VMWare and Office Depot
Posted July 8th, 2008 by theStockMasters...
Wow, Office Depot (NYSE:ODP) down 32% at $7 a share and VMWare (NYSE:VMW) falling 25% recovering to $39 a share today. Good luck fishing for a bounce with these guys.
VMWare is hurting, 2008 revenue growth will fall short of expectations and their CEO is gone.
VMware's board named former Microsoft Corp executive Paul Maritz to replace Diane Greene as CEO. It gave no reasons for the move. The company was founded a decade ago by Greene and her husband, Mendel Rosenblum, a computer science professor at Stanford University.
VMware said it expects revenue for 2008 to be "modestly below" its previous forecast for 50 percent growth over 2007. It did not elaborate.
Jefferies and Co analyst Katherine Egbert said she was disappointed the company did not hold a conference call to explain why it was cutting its revenue forecast.
She said she suspects VMware is concerned that sales of its server virtualization software will get squeezed by new competition from Microsoft, which late last month started selling a rival product. Microsoft introduced that product, which costs far less than VMware's offering, six weeks ahead of its previously announced launch date.
As for Office Depot, same-store sales fell nearly 10 percent in the second quarter and warned operating margins would fall more than expected.
Same sob story here, the U.S. economy is bad for business, I lost my homework, my dog ate it.
Credit Suisse analyst Gary Balter cut his price target on Office Depot shares to $13 to $8 on Tuesday and slashed his 2008 earnings per share estimate from 95 cents to 43 cents per share.
"Our Q1 earnings note title at the time, 'Self Delusional?', reflected our concern that the company seems not only to be headed on a downward spiral but also refuses to admit it," Balter wrote in a note. "That, as we have seen at too many retailers over the years, is a dangerous combination, and today's press release is an outcome of that."
Office Depot also warned that its second-quarter earnings before income tax (EBIT) margin -- or operating margin -- is expected to decline 2 percentage points more than the 2 percent to 2.5 percentage point decline it previously expected on a year-over-year basis, as sales trends worsened late in the quarter.
Masters, stay clear of ODP and VMW for now, there's better fish in the sea.
SOURCE: Reuters.com
- Login or register to post comments
Email this page
Please Review the StockMasters Disclaimer and remember that information provided by our site is at the investor's sole financial risk. Please Review for more Details
Too Soon for Doom and Gloom at VMware
http://www.fool.com/investing/high-growth/2008/07/08/too-soon-for-doom-and-gloom-at-vmware.aspx
There's change afoot at virtual server expert VMware (NYSE: VMW). Longtime CEO and co-founder Diane Greene has left the building, and the steering wheel is in new hands.
Greene's replacement is former Microsoft (Nasdaq: MSFT) bigwig and Intel (Nasdaq: INTC) executive Paul Maritz, who came aboard the good ship EMC (NYSE: EMC) this February when the data storage specialist bought his cloud-computing start-up Pi Corporation. The sudden and unexpected change of decor in VMware's presumably fanciest corner office led to an immediate 25% share-price drop. Ouch.
No disrespect to Ms. Greene, who deserves much credit for making VMware the company to beat in the virtualization software space. In 2004, the company generated $218 million in sales, a mere fraction of the $1.5 billion revenue seen in the last 12 months. However, I think it's a mistake to assume that VMware will be much worse off without her.
Maritz was responsible for some of Microsoft's most successful products, such as Windows 95, Windows NT, and the entire Office line in the late 1990s. He was part of the five-person brain trust that effectively ran Redmond, and the Pi venture has proven that he still has what it takes to be successful in the cutthroat world of software. After a short adjustment period, I believe that the company will get right back on the hypergrowth track again, ready to take on Maritz's former employer throwing its best stuff VMware's way.
There are murky waters ahead, and a P/E ratio of about 67 times trailing earnings after the 25% haircut is still not cheap.