VMware Stock Downgraded On Dell-EMC Concerns

VMware Inc. was downgraded to market perform from market outperform at JMP Securities on Tuesday after the company's pre-announcement of third-quarter results showed a decline in billings. Analyst Patrick Walravens cited competitive pressure from Amazon Web Services for the downgrade, pointing to General Electric's comments last week that it plans to shift 60% of its workload to AWS over the next three years. Dell's $67 billion proposal to buy EMC also does "little to alleviate" concerns, Walravens said. Pacific Crest lowered its 12-month stock target on VMware to $95 from $105, saying that Dell's proposed acquisition, while offering potential new market opportunities for VMware longer term, highlight's near-term financial challenges for VMware. Morgan Stanley reiterated an equal-weight rating on the stock and said the substantial increase in float resulting from the proposed deal could weigh on VMWare's stock "for some time." EMC currently owns 81% of VMware. Shares of VMware slid just 0.1% in premarket trade, putting the stock on track to open around $72.20. Its shares are down 14% over the last three months, versus a 4% decline for the S&P 500.