Who am I to second guess it. Virtualization is hot. In the past week VMWare went public closing at the end of the first day with a $20B market cap and Citrix agreed to buy XenSource for $500M.

WOW! This kind of activity make the bubble days pale in comparison.

I mean okay VMWare, hot company, fast top line revenue growth but also accelerating expenses. In 2006 the company reported revenues of $704M and net income of $87M or 12% of revenue. In 2005 VMWare reported $387M in revenues and net income of $67M or 17%. So revenue was up 82% but net income is declining on higher spending all around. If the company continues to grow revenues again this year at 82% the current $20B market cap means a 28x trailing twelve months revenue and a 15x current run rate revenues.

Compare VMWare to the Bladelogic IPO or the Opsware acquisition by HP and it looks pricey by comparison. But, given the market is so starved for growth stories it kinda makes sense.