Credit Suisse Upgrading VMware

Credit Suisse is upgrading shares of VMware Inc. VMW to Outperform and is raising its price target to $115 from $100. In a note to clients, Credit Suisse writes, "With the recent introduction of VMware vSphere 5, VMware changed vSphere's licensing to be based on consumption rather than physical server components. Specifically, VMware replaced licensing entitlements based on CPUs per server with a vRAM entitlement, which is the total amount of memory configured to all VMs in a customer's environment. Although much of Wall Street has struggled with vSphere 5's licensing change (given the initial customer pushback), our analysis indicates that the new license scheme will lead to meaningfully-higher long-term license revenue growth for VMware as compared to vSphere 4's model, which was negatively leveraged to Moore's Law. We are, therefore, upgrading VMware from Neutral to Outperform." Shares of VMW closed at $90.66 on Friday.