VMWare (NYSE:VMW) shares are a third off of their highs today after the stock hit $84.60. The company managed to lose $15 billion in market cap in only ten trading days amid a steep market downturn - particularly in tech. The move has many investors wondering whether or not this company is really worth the $40 billion market cap that it has now.

VMWare posted revenues last quarter of $357 million, which was up 88% over the same quarter last year. Meanwhile, earnings per share tripled to $0.18 per share. However, does this justify a valuation of $40 billion? Well, assuming that VMWare will raise its earnings 100% for the next five years and then 50% for another 5 years after that, we can discount all this future cash flow to a present value of $31 billion.

VMWare also faces significant competition. Microsoft recently announced its own initiatives to include virtual desktop tools with its operating system. And with billions of dollars at their disposal, Microsoft will likely be able to promote their product substantially more than VMWare.

In the end, it will be interesting to see how fast VMWare is able to grow their revenues and earnings. Whether or not this valuation is justified remains to be seen, but VMW is a stock that is definitely worth watching!

Related Companies
Quality Systems, Inc. (QSII)
MGT Capital Investments (MGT)
GSE Systems Inc. (GVP)

Omnicare, Inc. (NYSE:OCR) investors are growing increasingly restless with shares trading near their 52-week low but some investors are upping their stake. ValueAct Capital increased their stake in the company despite an investigation by the Department of Justice. It will be interesting to see if this aggressive investment pays off, but there are many investors watching.

The Department of Justice issued a subpoena last week seeking information about Omnicare from the UnitedHealth Group "under its authority to investigate health-care fraud offenses". The subpoena called for UnitedHealth to provide all documents concerning "attempts by Omnicare to steer patients to Medicare prescription-drug plans".

"We do not believe there is anything significant related to this review that has not already been disclosed in our public filings," Omnicare said in a statement. "Our programs related to the implementation of (the Medicare drug benefit) have been carefully reviewed by outside legal counsel, and we firmly believe that we have complied with all applicable laws and regulations with respect to these matters."

In the end, events like this happen all the time without justification. A few years ago, the DOJ investigated online education companies for taking too much state tuition money, but the investigation turned up nothing. These stocks trade near 52-week lows and eventually return to their highs if they are found innocent. Whether this company is innocent or not remains to be seen; however, at least one investor is showing his cards!

Related Companies
Medco Health Solutions (MHS)
Walgreen Company (WAG)
CVS Caremark Corporation (CVS)

Ford Motor Company (NYSE:F) reported a net loss of 19 cents per share for the third quarter compared to a loss of $2.79 per share a year ago. The news could signal the beginning of a successful turnaround for the troubled automaker and came as a surprise to many investors. Margins are growing, incentives are falling and sales are becoming more profitable.

Ford has traditionally been the weaker of the big three automakers as it does not have hedge fund backing, massive sales outside of the USA, or cost cutting already behind it. However, this earnings announcement indicates that they may be able to pull off a turnaround anyway. The company reported improved overseas sales, increased margins in the United States, and is ahead of its $17 billion cash outflow target for 2007-2009 period.

Ford also said it was close to selling its Jaguar and Land Rover units but its CEO said there are no longer any plans to sell the Volvo market. The company likely decided to hold off because of the lowered cost of a turnaround. The company leveraged its assets to borrow $23.4 billion last year, but now doesn't expect restructuring costs to reach even that level.

In the end, Ford is on track to reach profitability in 2009. This is a remarkable achievement given the short timeframe for their turnaround and the increased competition in the auto market. Combined, these factors make F a stock worth watching closely!

Related Companies
General Motors Corporation (GM)
Toyota Motors Corporation (TM)
Dollar Thrifty Automotive Group (DTG)