Virtualization software maker VMware delivered stellar fourth-quarter sales and earnings this week, but analysts are already laying odds on which software companies it will acquire this year as it builds out its platform-as-a-service (PaaS) strategy.
Technology investment research firm 451 Group this week offered up a list of potential takeover candidates, including the likes of Chordiant Software (NASDAQ: CHRD), a Cupertino, Calif.-based developer of customer relationship management (CRM) applications; Terracotta, a San Francisco-based open source developer of applications that support virtualization and cloud computing; and Skyway Software, a Tampa, Fla.-based developer of an open source, Java-based development environment on the SpringSource platform.
Palo Alto, Calif.-based VMware (NYSE: VMW) recently has shown it's not averse to inorganic growth.
In August, VMware acquired SpringSource, a Java Web development and middleware vendor that's central to the open source Spring Framework used and supported by numerous Java middleware vendors, including Red Hat JBoss and IBM Websphere.
Earlier this month, VMware snapped up Zimbra, Yahoo's open source e-mail collaboration unit.
"VMware is expected to be a player in the burgeoning PaaS space, particularly in building applications for private cloud environments," 451 Group analyst Dennis Callaghan said in a research note. "VMware's recent deal for Zimbra can fit into this strategy, but we anticipate that it will notch a few more buys -- some small, some potential blockbusters -- as the year progresses."
VMware's inclination to buy and expand its sphere influence beyond datacenter virtualization to more cloud-based offerings is buoyed by mounting evidence that IT capital spending budgets will expand in 2010.
"We're seeing a major shift in our industry," CEO Paul Maritz said during a conference call with analysts this week. "The great recession of 2009 convinced customers they can't prop up aging infrastructure forever."
451 Group also named GemStone Systems, a Beaverton, Ore.-based data management software developer, MuleSoft, an open source infrastructure software developer in San Francisco, and Sopera GMBH, another open source infrastructure software developer based in Germany, as potential M&A targets.
Callaghan said VMware still needs to find a dynamic open source database to support its PaaS suite.
"It's a long shot, but.the best database to underpin the VMware-SpringSource PaaS offering would be the open source MySQL," he wrote. "We have to think VMware would love to take MySQL off of Oracle's hands."
"Whether Oracle would let it go and help a PaaS and application server rival is another matter," he added.
Should VMware opt to go on a shopping spree, it will have plenty of cannon fodder to expend. The company exited the quarter with $2.4 billion in cash.
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