VMW's 335 million shares had an EPS of $0.26 last year. If their net
income this year was equal to revenue last year it would still put it
at a P/E of 27+ at current prices. If VMW is really worth $55/share
then VMW's $18B is half of EMC's $40B valuation. Either EMC is
severely undervalued or $55 for VMW is way too high. $15 for VMW is a
deal, $29 is more than fair to the shareholders of EMC, $55 is way
overpriced. EMC did the right thing for shareholders to price VMW at
$29.

If some will pay $55 that's what it's worth. For now.

you might think that its overpriced and thats why you can sit on the
sidelines when we make all the money, VMW  is trading at 55 based on
future growth, we dealt with the same thing when google came around
and bidu, bidu p/e was like 200 at one point look where its at now, so
to you its overvalued and to me its a value investment

you both have solid points.  But the most important part is that the
company can control their stock price with future splits to bring the
P/E down to make it more appealing for high growth and more
investors.  There are so many aspects you have to look at with an
IPO.  Right now like Mr. DcMil had mentioned.  its trading at 55
because that is what it is worth today.  like they say buy and hold.

yes..both solid points..I would also consider the overall market
situation. Right now, even the strong companies are not moving
forward...either they are going down or holding their prices
somehow...tech has very less to do with subprime mortgages..still,
that is affecting the market overall (and also world economy)...I
would say, better be careful then spending everything...I think VMW at
this price is not for short...you can buy and hold for a long time..if
market improves, it will be rewarded for sure...just a thought !!!

Whoa that is simply incorrect Navid -- To be clear, splitting your
stock does nothing to change the P/E ratio of a business.  As an
example, if a stock is trading at 100 and the EPS for the company is
$5 that year, then its P/E ratio is 20, i.e. the price of the business
is 20X the earnings of the business.

Now, assume there are 100 million shares outstanding for that same
stock.  If management decides to split the stock at, let's say for
simplicity's sake, a 2:1 ratio, then the company's stock price will go
to $50, and the the number of outstanding shares will double to 200
million shares, which will mathematically decrease the earnings per
share by 50%.

Lesson: companies cannot control their P/E ratio by splitting stock;
when a company splits its stock it is simply performing a mathematical
division which does not change anything (other than the psychological
perception perhaps that their stock is cheap versus expensive).

How can you safely compare VMW and GOOG?  The reason Google was so
successful was because it did have a lot of potential growth by its
wide range of products and services it has (although ads is its main
money maker, people hope that another one of Google's services will
catch on, hence Google's high price).  VMW on the other hand ONLY
MAKES VIRTUALIZATION SOFTWARE.  Their potential for growth is no where
near that of Google's.  You won't see VMW working with phone companies
and bidding on wireless airwaves.  Yes, the news is correct reporting
this as one of the biggest IPO's since Google's, but that is not
saying VMWare will be anywhere near as successful as Google.

then tell me why Intel and Cisco have been companies that have
invested into this company?

P/E remains same with stock splits.

Example: Company X

Scenario I - Shares outstanding = 1000
                 Price = $10
                 Net Income = $1000
                 EPS = $1
                 P/E = 10x

Scenario II - After 2:1 stock split
                  Shares outstanding = 2000
                  EPS = Net Income/Shares outstanding = 1000/2000 =
0.5
                  Price = $5
                  P/E = 5/0.5 = 10x

In fact, since the price 'looks' cheaper or rather attractive I would
assume it would only drive up the Price and thus the P/E ratio.
Correct me if I am wrong..

I dunno, because they want to have a say in the direction of the
company? There are many possible reasons for them to invest, but
companies like Intel and Cisco don't invest for the same reasons you
and I invest for.  Intel's and Cisco's stockholders would be very
angry if they changed their buisness model from doing what they do to
investing in the stock market.  INTL and CSCO are not hoping to catch
the next GOOG that will allow them to retire early though, that is for
sure.

Cisco and Intel have invested in the company for the same reason that
Microsoft has created an entire group to compete with VMWare.  Not
only is the company well run and profitable, but they own the market
space.  As to the growth of the market space, understanding the
product and the issues that IT faces with software releases, the
future looks very bright indeed.

Personally, I think VMW is a steal at $55... and as opposed to Google
their valuation is not based on speculation and name recognition but
rather on solid proven technology that is being rapidly adopted across
the IT organization.