>VMware : Another dot com sequel

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>Oh VMware, I was so disappointed when I didn’t buy you in the IPO at $29. My pain was worse when you soared past $100, but now I am not so sad since your CEO left and stock price bled. Will I buy you now? I think not, after all your profits are a falling and the competition is a coming!

That is my ode to VMware (VMW), which suffered a 25% fall in its stock price today when it replaced CEO Diane Greene and warned that revenue would fall short of prior estimates. VMware which sells virtulization technology and is controlled by data-management provider EMC Corp., has fallen heavily since a blockbuster partial spin-off in August last year. VMware stock tripled from its $29 opening price in the first month — the biggest technology IPO since Google Inc. went public in 2004. But since hitting a 52-week high of $125.25 in October, the shares have lost nearly 70 percent of their value to close at around $39 yesterday.

I was quite disappointed not to have bought the stock after the debut, especially since I have used their technology and thought it was a good product. Soon after they listed the stock doubled to about $60 and I felt it was way too expensive. However it continued its inexorable rise past $100 and I watched in despair as I thought about the profits I could have made. I almost pulled the trigger to buy at $120 following bullish media reports; Luckily common sense prevailed as I knew that if I thought the company was over valued at $60, it must be much more priecy at $120 given no change in market conditions. The falls over the last month have vindicated my views, though I still could have made a nice profit if I bought at the IPO and sold near the top. The rise and fall of VMware in less than one year is a throwback to the dot com era and a good reminder of the trading lessons from then.

For folks who are still holding onto the stock, keep it for now until current bad news around the company subsides. The stock should recover a bit in a month or so, though I don’t think it will return to previous lofty levels. The lesson from all this is to sell if your investment doubles or at least take some profits. If you held the stock all the way down you got greedy and were hoping for a miracle will never come.

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