Short VMWare and Buy IBM

A technology trade that will be somewhat market neutral is the combination of shorting VMWare (VMW) and being long International Business Machines (IBM). If the market stays in a trading pattern you will be able to profit on both the long and the short side of this trade.

VMWare Disappoints

            VMWare has fallen rapidly from its post IPO high of $125 a share to a recently low of $34.75. In its recent quarterly report the company matched lowered expected earnings but gave a third quarter revenue estimate that scared investors. A number of issues continue to derail the company creating its lower revenue views; Poor execution, economic slow downs in both the US and in Europe, a CEO change, and increased competition.

IBM Tech Strength

            IBM on the other hand has shown strength in a tough market the last couple of days and is within reach of a new 52 week high daily. On July 18^th the company reported 2^nd quarter earnings that beat estimates and delivered service numbers that impressed Wall Street. Its internal reach and a combination of software and hardware makes the company better able to withstand the current economic troubles in the US and Europe. The company also raised its earnings forecast for 2008 by 25 cents a share leading to four day rally in the stock price.