VMware Includes Windows 10 Upgrades On Desktop Virtualization Suites For Mac And Windows

VMW: VMware logo

Virtualization giant VMware (NYSE:VMW) announced upgrades for its desktop virtualization software suites VMware Fusion (for Mac) and VMware Workstation (for Windows). [1] [2] The enhanced desktop hypervisors allow users to run Windows 10 sessions on their existing Mac or Windows computers systems. The company made these announcements just days after virtualization company Parallels announced the release of its latest software Parallels 11 for Mac systems. [3]

VMware, the industry leader in providing virtualization and cloud computing software and services, reported a strong set of quarterly results last month despite a slowdown in software licenses revenues. Services revenues drove much of the growth for VMware. The launch virtualization software that supports Windows 10 could help the company generate higher license revenues. During the most recent earnings call, the company issued guidance of license revenues of about $680 million in Q3, which is about 6-7% higher on a year-over-year basis. Net revenues could rise by about 9-10% to $1.65 billion. Below we discuss the key trends driving the desktop virtualization market segment and how it impacts VMware.

We have a $91 price estimate for VMware’s stock, which is slightly higher than the current market price. VMware’s stock price has fluctuated between $77 and $90 this year.

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Desktop Virtualization Market And Hosted Desktops

The virtualization market grew in the last decade, predominantly due to server virtualization of x86 servers with VMware being a key player in the market. In the last few years, the industry has started shifting to desktop virtualization, often in conjunction with server virtualization. This makes it easy for clients to not only host their servers on the cloud, but also to run software and applications on virtual desktops, and also significantly cuts down hardware ownership and maintenance costs for clients. Desktop virtualization includes Virtual Desktop Infrastructure (VDI), Desktop Virtualization Servers and Hosted Virtual Desktop. Currently, VDI or Desktop-as-a-Service (DaaS) is the largest segment within desktop virtualization, with VM Horizon suite being the dominant player in the market along with Citrix XenDesktop and Microsoft. In a recent report, IDC named VMware as a market leader in terms of capabilities of the product offered. [4] However, the company had a lower market share in the combined Virtual Client Computing market than both Citrix and Microsoft. [5]

Within the desktop virtualization and end-user computing market, VMware’s Fusion and Workstation desktop software enable users to develop and test software on multiple operating systems simultaneously from a single device. VMware Fusion and Fusion Pro are built to be used on Mac devices, whereas Workstation Pro and Workstation Player are compatible on all latest PC and tablets. The Fusion 8 and Fusion Pro 8 are compatible with the latest Apple operating system, the OS X El Capitan, with added support for Microsoft DirectX 10 and OpenGL 3.3. Fusion Pro 8 and Workstation Pro 12 are available for $200 and $250, respectively, while the trimmed down versions Fusion 8 and Workstation Player 12 are available for $80 and $150, respectively.

According to an estimate by MarketsandMarkets, the Workspace-as-a-Service (WaaS) market is expected to grow at a a CAGR of 14.6% from $4.8 billion in 2014 to $9.4 billion in 2019. [6] The consolidated WaaS market includes VDI, Desktop-as-a-Service (DaaS), hosted applications and security solutions. Assuming linear growth in the forecast period, the WaaS market could potentially be an $8.2 billion market by 2018. Within WaaS, IDC estimates the hosted desktops market to be a $1.7 billion market. [7] Taking a conservative assumption, if VMware can successfully capture about 20-25% of this market in the next five years, it could lead to an annual rise in license revenues of about $300-$400 million per year.

VMware has witnessed strong demand for its end-user computing and mobility solutions in the last few quarters since it acquired Airwatch for $1.5 billion last year. The trend was highlighted by a 50-60% year-over-year increase in end-user computing license bookings through 2014 and in Q1 this year. Keeping up the trend, the company witnessed a 30% year-over-year increase in license bookings in this domain through the June quarter. The growth rate was lower than previous quarters mainly due to tougher year-over-year comparisons. Within end-user computing, the desktop-as-a-service business grew by a healthy 15% on a y-o-y basis and the company gained share from competitors. [8] The addition of virtualization software for Windows 10 could help boost license revenues from both Mac and Windows users.

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  1. VMware Launches VMware Fusion 8 and Fusion 8 Pro With Support for Windows 10, Accelerated Performance and Enhanced Connectivity, VMware Press Release, August 2015 []
  2. VMware Announces VMware Workstation 12 Pro and Workstation 12 Player, VMware Press Release, August 2015 []
  3. Parallels 11 arrives with support for Windows 10, El Capitan, CNET, August 2015 []
  4. VMware Named A Leader in the IDC MarketScape for Client Computing Software, VMware Blog, June 2015 []
  5. IDC MarketScape: Worldwide Virtual Client Computing Software 2015 Vendor Assessment; VMware Excerpts, VMware Horizon Air, June 2015 []
  6. Workspace as a Service Market worth $9.41 Billion by 2019, Markets and Markets, March 2015 []
  7. Worldwide Workspace-as-a-Service 2014–2018 Forecast, IDC, July 2014 []
  8. VMware Q2 2015 Earnings Call Transcript, Seeking Alpha, July 2015 []