Citi Initiates Coverage On VMware

Citi initiated coverage Monday on VMware, Inc. (NYSE: VMW) with a Buy raing and $104 price target

Analysts Walter H. Pritchard and Kenneth Wong expected “VMW will put up strong Q4 into modest expectations and while FY15 guidance will likely come down from 'mid-teens', we expect mid-point will be comfortably above 10 percent."

Pritchard noted three key issues for the company:

1. "Pace of adoption and ultimate size of new markets - network / security, storage, management, hybrid cloud."

2. "Execution on larger deals, potential changes to contracting and rev rec to remedy this."

3. "Ability to compete for next-gen workloads (PaaS, OpenStack, containers, cloud native)."

The analysts also thought that an "expanding product line should drive sustained double-digit growth" and that there is "too much controversy around [its] strategic position" on the heels of a new product release.

Positive catalysts included the February vSphere 6 release which should improve percieved competitiveness as well as the March release of integrated OpenStack.

VMware recently traded at $81.12, up 2.8 percent.