This weekend may mark the official end of Summer, but VMware (NYSE:VMW) and EMC Corp. (NYSE:EMC) shareholders are going to have to watch the calendar.  The brokerage firm and underwriting quiet period for this super-hot IPO should be ending.  This may actually be one of the most impacting events on shares of VMware and on EMC since the IPO, even if it is merely the order of post-IPO transition on the calendar.  That being said, the analysts at the underwriting firms will all be able to issue formal research reports and those may start coming very soon.

To throw another wrench in the machine, Friday is September stock options expiration date.  We recently noted how traders have been using stock options as a stealthy way of having exposure to VMware.  We have referred to a "VMware conundrum" and this may be contributing to the option trading as "less risky" trade if you can imagine that.

Some analysts have already started coverage, but the real researchfrom the underwriters is what Wall Street investors will be keying offof most.  Depending upon how the bulk of the analysts of theunderwriting firms initiate coverage this could be a large positive ornegative for the stock.  Virtualization is the next "next thing," andnow it will all boil down to how certain analysts are willing to valuea major growth story.

VMware now also has close to the same market cap of Adobe Systems(NASDAQ:ADBE).  You will have to determine your own valuations as thecompanies are at entirely different stages in the respective businesscycles, but this is worth a review.  VMware has already made an acquisition after less than a month of its IPO.  It also has an East Coast virtualization conference in the coming days and has made its plans for its European VMWORLD in early 2008.

Here were the firms that were in the final underwriting syndicatethat can begin coverage, although investors should be well aware thatnot all are obligated to cover the stock and we have not been given anyindications from the research departments of whether they will issuefavorable or cautious coverage:  Citigroup, J.P.Morgan, LehmanBrothers, Credit Suisse, Merrill Lynch, and Deutsche Bank.  Here arethe independent brokerage firms that VMware lists on its site thatalready cover the stock (plus current ratings we have found, whichcould have changed already):  Caris & Co. "Above Average"… Cowen & Co. "Neutral"… Jefferies "Buy"… RBC Capital "Sector Perform"… R.W.Baird "Neutral"… ThinkEquity "Source of Funds"… Bernstein (pre-IPO coverage)… and Benchmark (unknown).

Here you can also see how we covered the Special Situation specificallyregarding EMC Corp. (NYSE:EMC) and how we expected the VMware to playout for holders of EMC shares before and after the IPO.  We arebelievers in the sector and are not against these companies, but wedidn’t pull out the pom-poms with simple math calculations over "EMC has X-Billion all of a sudden in hidden value on the books."  This was sent out to subscribers of the Special Situation Investing Newsletter.

Stay tuned.  Once the coverage universe from underwriters opens up,there is going to more than likely be a lot of sudden volatility aroundthe shares.  If you take a look at the manner in which Goldman Sachsmerely removed EMC from its beloved Conviction Buy List, you’ll see what sort of volatility can be created in both stocks.

Jon C. Ogg
September 21, 2007

Jon Ogg can be reached at [email protected]; he produces the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

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