VMware Shares Rise on Target Price Increase

Shares of virtualization software maker VMware continued to climb Wednesday after an analyst raised the stock's 12-month target price to $90 from $60.

Shares rose $2.55, or 3.3%, to reach $79.20 in morning trading. The stock touched a new all-time high of $82.75 on Tuesday.

VMware's software lets a single computer function like multiple machines, allowing companies to spend less on equipment and energy in their data centers.

In a note to investors, Caris & Co. analyst Shebly Seyrafi raised the company's 12-month target price, citing new developments that demonstrate strong acceptance of VMware's products and a validation of virtualization software.

One key development is Citrix Systems purchase of virtualization specialist XenSource for $500 million, even though XenSource will have very little revenue in 2007.

"Clearly server virtualization has been validated and VMware, which will have at least 10 times Citrix/XenSource's revenue in 2009, is the best-positioned," Seyrafi wrote.

Additionally, computer chip makers AMD and Intel have announced new processors that enable virtualization, private companies in the space are gaining increased coverage in the media, and server and storage virtualization companies are starting to work together more, Seyrafi said.

Still basking in the glow of its blockbuster initial public offering this summer, the spinoff of EMC has seen shares have nearly tripled from their initial price of $29. The company is drawing close attention this week because of a user conference, where it has announced new deals.

The Palo Alto, Calif.-based company's IPO raised $1.1 billion, the most a high-tech company has raised since Internet search engine Google went public three years ago.