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Balancing Out the Hype and Harm for VMware

By Paul Rubens (Send Email)
Posted May 14, 2015

Marketing people love to tell you how wonderful their company's products are, but they rarely mention the weak points. And that's fair enough — it's their job to do exactly that, after all.

But it does mean that if you want to get a more balanced view you'll Virtually Speaking generally have to look beyond the company concerned and instead seek out independent opinions.

There are times, though, when companies are forced to be more candid and balanced in the utterances they make about their products. And VMware has just had one of these times, marked by the publication of its annual Form 10-K.

These Form 10-Ks are designed to provide a comprehensive overview of a company's business and financial condition, and for that reason they make very different reading compared to the standard marketing guff that most companies produce.

They contain warnings about everything that investors could possibly need to be aware of, and are often so laden with doom and gloom that they're probably just as unbalanced in a negative way as the messages from marketing departments are in a positive way.

So what does VMware's Form 10-K have to say for itself?

It turns out to make for some rather interesting reading…

The Anti-Marketing Read on VMware

In the most recent Form 10-K report, VMware confesses that its traditional server virtualization business is maturing rapidly, and that it faces strong competition in both the virtualization space and the cloud and software-defined data center (SDDC) spaces. But that much we knew already, even if we are not particularly accustomed to VMware staff saying so quite so explicitly.

Most interestingly, the company appears to concede that it is something of an anomaly: a relatively small entity that must compete with leviathans (like Microsoft , Amazon, Google and Oracle) as well as groups of smaller competitors banding together to oppose it.

Another interesting snippet concerns VMware's core server virtualization products. It's easy to forget that this is VMware's core business, such are the company's efforts to emphasize cloud, software-defined networking (SDN) and storage, and all the rest of its non-core product portfolio. But in its Form 10-K, VMware says:

The large majority of our revenues have come from our server virtualization products. Although we continue to develop other applications for our virtualization technology such as our network virtualization solution, VMware NSX, end-user computing products and hybrid cloud services and expand our offerings into related areas such as our vRealize SDDC management products and vCloud product suites, we expect that our server virtualization products and related enhancements and upgrades will constitute a majority of our revenues for the foreseeable future.

Let's look at those first few words again: "the large majority of our revenues come from our server virtualization products." VMware always has been, and still is, a server virtualization company. Despite its attempts to diversify or move on from this mature area, all the new stuff is not nearly as important to the company as it may like you to believe. It may be good — strategically important even — but as yet, the new efforts are not actually generating a significant proportion of VMware's revenues.

Next Page: VMware Facing Increasing Competition on Several Fronts

Paul Rubens is a technology journalist and contributor to ServerWatch, EnterpriseNetworkingPlanet and EnterpriseMobileToday. He has also covered technology for international newspapers and magazines including The Economist and The Financial Times since 1991.

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Next Page: VMware Facing Increasing Competition on Several Fronts

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