VMware (NYSE:VMW), the leading virtualization company, has announced that it will reintroduce the enterprise social networking platform Socialcast. VMware acquired the company in 2011 and has announced that it will support a full feature version of the product for up-to 50 users for free. It believes that a scaled back free version offered in current freemium models does not give potential customers a good user experience and its current strategy might help convert potential customers effectively. 
Growth Of The Enterprise Social Network
Enterprise networks can be broadly classified into two types. The social intranet or an internal social network for use by the employees of an organization and an enterprise network for customer service and sales which doubles up as a platform for companies to engage customers via social networking in a bid to improve customer service.
The social intranet is a network within an organization where employees can collaborate on projects and the leading social intranet provider is Salesforce.com (NYSE:CRM) with its service Chatter. One of the biggest advantages of Chatter is that it helps drive consumption of other paid services such as the enterprise CRM and Salesforce automation services which can easily be integrated with Chatter and this networking effect is likely to be the biggest advantage of offering a free enterprise social network.
VMware Looks To Diversify
VMware is a virtualization company and this division accounts for 90% of its current Trefis price estimate. Socialcast currently does not contribute significantly to VMwares revenues, but if enterprise social network provider Jive is used as a benchmark, this can become a major source of revenue going forward. Jive reported an annual revenue of ~$80 million in 2011 and is one of the leading players in this space.
We have a $109 Trefis price estimate for VMware, which is 15% above the current market price.Notes: