VMW – Market expectations are for Uniform ROA to decline, and management may have concerns about their security solutions, customer base, and demand

February 8, 2021

  •  VMware, Inc. (VMW:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 22.8x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may have concerns about their new security solutions, their customer base, and service demand
  • Specifically, management may lack confidence in their ability to prudently manage cash, sustain Tanzu’s customer momentum, and grow NSX’s and vSAN’s customer base. Furthermore, they may have concerns about changes to their sale force incentive and the sustainability of strong bookings. Moreover, management may be exaggerating the strength of their total backlog, the potential of their Success 360 offerings, and the capabilities of their new Carbon Black Endpoint Security with Intrinsic Security solution. They may also lack confidence in their ability to improve the security business through partnerships, combat the growing number of cyber-attacks, and sustain customer demand through their digital foundation