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Crossroads

Dell Buys EMC: VMware at a Crossroads

As Dell buys EMC and a stake in VMware for $67 billion, many pundits are wondering how VMware will — or won’t — evolve under Dell’s control.

VMware has faced a growing number of growth-oriented questions in recent quarters. While the company’s virtualization software remains wildly popular, multiple market inflection points and potential rival technologies have emerged. Chief among them:

1. Docker and other container technologies seem to represent the next generation of virtualization. And in some customer scenarios, it looks like containers may eliminate traditional virtualization.

2. Microsoft Hyper-V, the free hypervisor, has gradually gained many of the enterprise-class features that VMware is known for.

3. On the hybrid and public cloud fronts, VMware has to move faster with its vCloud Air public cloud initiative. Although most customers seem to be pursuing hybrid cloud efforts, the public cloud component is increasingly important. And both Amazon AWS and Microsoft Azure are widely viewed as the public cloud leaders.

4. On the software defined data center (SDDC) front, VMware and its sister products seem ideally positioned to help customers extend virtualization from servers to networks to storage. But even that market is now filled with upstarts and entrenched giants that are looking to decouple software from hardware.

VMware, seeking to address investor questions amid Dell’s buyout of EMC, today released preliminary Q3 2015 results. Revenues are expected to jump about 10 percent, and net income is expected to rise about 35 percent. On the one hand, that sounds impressive. But on the other, investors seem nervous about Dell’s long-term ability to manage EMC and VMware. Indeed, VMware shares were down about 9 percent as of 9:43 a.m. ET today.

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