Tuesday, November 19, 2013

Amazon.Com, Inc. (AMZN): Workspaces Negative For Citrix Systems, Inc., Vmware, Inc.

Amazon.com, Inc. (NASDAQ: AMZN) announced its entry into the desktop virtualization market. This offering, WorkSpaces, provides secure, cloud-based access to corporate documents & applications via the user's device of choice (laptop, tablet, etc.).

WorkSpaces, considered one of the Amazon's significant product announcements, eliminates the upfront and on-going expenses associated with building out an owned infrastructure (<50% costs versus traditional desktop virtualization infrastructure solutions).

"AWS VPC can support between 16 private IP Addresses to 16,500 private IP addresses, which means that AWS Workspace is suited for both Med-to-Large enterprises," Global Equities Research analyst Trip Chowdhry wrote in a note to clients.

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AWS WorkSpace is negative for Citrix Systems, Inc. (NASDAQ:CTXS) and VMware, Inc. (NYSE:VMW).

WorkSpace may hurt Citrix's products such as XenApps, XenClient, XenDesktop, which accounts for more than 25 percent of Citrix's revenues. On the other hand, VMware gets about 8 percent of its sales from this space.

"Converged view is that AMZN is getting the same pricing discounts from Microsoft on Windows OS and Office, that a typical large reseller/OEM gets, which is about 30% to 40% discount," Chowdhry noted.

Over the last 6 years, whenever Amazon enters a technology space, the pricing in that specific market collapses, and the same could happen here. The pricing for both Citrix's Xen Offerings, as well as VMWare's View product, may drop significantly, thereby dampening their sales and margins.

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"Neither VMW nor CTXS has the economies or scale or scope to effectively compete with AMZN AWS WorkSpace, and probably they are better off exiting these businesses, before these businesses end up being the new Blackberry," Chowdhry said.

With a few clicks in the AWS (Amazon Web Ser! vice) Management Console, customers can provision a high-quality desktop experience for their users at less than half the cost of most traditional virtual desktop infrastructure (VDI) solutions.

On-premises VDI solutions offer the benefits of centralized desktop management and security at a high cost, requiring companies to invest in their network and storage infrastructure to support the delivery of a high-quality virtual desktop experience.

By migrating enterprise desktops to the cloud, Amazon WorkSpaces eliminates both the up-front investment and the ongoing management of infrastructure while still offering all the security and efficiency of a centralized model. For a low monthly fee, Amazon WorkSpaces provides a complete cloud-based desktop computing service including compute, persistent storage, and software applications.

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Customers can select from a range of Amazon WorkSpace bundles that provide a choice of CPU, memory, storage and applications – and launch any number of desktops with a few clicks. Amazon WorkSpaces can integrate with an existing Active Directory to allow end-users to use their existing enterprise credentials to access their Amazon WorkSpace.

Amazon WorkSpaces includes technology components licensed from Teradici and leverages the PCoIP (PC-over-IP) protocol to compress, encrypt and encode the users' desktop computing experience and transmit 'pixels only' across any standard IP network to users' devices.

In addition, the WorkSpaces Sync client lets users sync their documents between their Amazon WorkSpace and other computers so that they always have access to their documents. This client will be downloadable at no charge from the Amazon WorkSpaces client download page, and the Amazon App Store for Android, Google Play and the iTunes App Store.

Beyond the productivity benefits, the enterprises are expected t! o save ov! er 40 percent of the life cycle cost for desktop services while also gaining additional benefits such as built-in security, telecommuting flexibility, high availability and simplified operations management.

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