Last Thursday I visited VmWare (VMW) forum in Minneapolis. And I saw the future.
There is a lot of talk about cloud computing. The idea is simple: take a lot (hundreds, thousands) of inexpensive, Intel-based computers, put them into racks, connect to the network, and use them for different tasks which require a lot of computing power. There is a small problem here: computers without software are useless. And cloud computing requires specialized software. There is specialized software in huge data centers built by Yahoo! (YHOO), Google (GOOG), Amazon.com (AMZN) and by other companies. All this software is proprietary, you can't build your own data center with it.
Here comes VmWare. This company produces virtualization software. Initial idea was that you can build your specialized virtual machines inside of a real computer and then move them around if you need. But new product, vSphere 4, allows you to build a cloud. All cloud functions are here: you can rapidly build virtual machines, clone them, move data and whole virtual machines around.
If you asked me a month ago "what do I need to build a computer cloud?", my answer would be: hundreds of millions. You'd need huge resources to pay good programmers to develop your own cloud computing software, debug it, make it production ready and then support it. Not anymore. Now you can just install VmWare software. It will cost a bundle, but orders of magnitude less than cost of building your own.
I wanted to by VMW right after the forum. As usual in the last couple of months, waiting for a pullback just makes stock more expensive. I'm going to open position anyway in the next several days.
Full disclosure: at the time of publication author had a long position in GOOG and no positions in other companies mentioned. Positions can change any time.