After VMware Inc. (NYSE: VMW) announced poor fourth-quarter guidance, a few analysts weighed in on the company and the direction they believe it is going. One key analyst, Oppenheimer, took a neutral stance on this company despite downgrading it. The firm downgraded VMware to a Perform rating removed its $78 price target.

Oppenheimer made this call believing that VMware’s core vSphere virtualization engine is facing secular and competitive headwinds and is in decline. The firm also saw that new growth areas such as vSAN, NSX and EUC are not large enough to drive strong growth, and the investment required to grow the Virtustream joint venture with EMC could weigh on margins, earnings and cash flow for years.

Adding to the fundamental headwinds is lack of near-term interest from Dell/EMC to create value at VMware. Put together, Oppenheimer sees a long transition period through which the shares could remain volatile. The firm is stepping to the sidelines.

Based on its detailed analysis, Oppenheimer believes VMware’s core vSphere business is now in decline. The firm modeled a 7.1% license revenue decrease in 2016 to roughly $1.2 billion. It believes the transition of workloads to the cloud, growing pricing pressure and the emergence of containers are headwinds that will weigh for the foreseeable future.

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The firm estimates VMware’s new growth areas, such as EUC/NSX/vSAN/Virtustream, could account for 13.8%and 15.7% of estimated 2015 and 2016 revenue, respectively. That said, they contribute only 3.4 and 2.5 points of growth in 2015 and 2016 earnings, respectively, and lack the scale to drive meaningful growth. Oppenheimer believes that more time is needed for these growth engines to matter.

VMware is clearly hurt by the transition of workloads to the cloud, where its current participation is limited. ‎Hence, the Virtustream JV with EMC is logical, according to Oppenheimer. But, VMware will need to massively invest to build scale, which could weigh on margins, earnings and cash flows. Playing catch-up to cloud leaders Amazon and Microsoft could weigh on results for years.

As for the downgrade to Neutral, the firm is stepping to the sidelines, given the aforementioned secular cloud, Virtustream investment, and Dell/EMC-deal related headwinds. Oppenheimer sees better opportunities in the stock in second half of 2016, once Dell/EMC closes, when estimates more appropriately reflect Virtustream, and year-over-year foreign exchange headwinds subside.

Shares of VMware were last seen trading at 55.21, with a consensus analyst price target of $77.71 and a 52-week trading range of $52.72 to $93.43.

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