Feeds

EMC tries to appease investors with VMware IPO

Follows our advice

Next gen security for virtualised datacentres

EMC will set its VMware subsidiary somewhat free via an IPO (initial public offering).

The storage giant will sell close to 10 per cent of VMware through the IPO of newly issued VMware stock. EMC plans to keep the remaining shares of VMware and stressed that it has "no intention of spinning out" the server software maker. The deal could provide a nice boost for EMC shareholders who have watched VMware's sales skyrocket while EMC's share price has remained flat.

"VMware is one of the fastest-growing businesses in the history of the software industry," said EMC CEO Joe Tucci. "We expect the IPO to unlock more of VMware's value for EMC shareholders while also strengthening its ability to retain and attract the software industry's top talent."

In Nov. of 2005, we called for such a move and learned that EMC and VMware executives had debated the idea of an IPO for some time.

During EMC's most recent quarter, VMware again showed stunning growth with a 101 per cent rise in revenue to $232m. VMware's server partitioning software has become very popular with large, corporate customers looking to run a number of applications on a single server. The subsidiary has shown some of the most dramatic growth of any software business over the past few years.

Despite strong software and storage sales, EMC's share price has hovered around the $14 mark for about three years.

EMC expects the IPO to occur during the US summer, while El Reg expects a healthy consulting fee reward once the IPO happens.

Diane Greene and Mendel Rosenblum, two of VMware's founders and a wife and husband team, have remained a constant at the company, which has grown from 300 workers to 3,000 workers since EMC's $630m Jan. of 2004 acquisition. Both founders have strong engineering backgrounds and obvious business skills.

In an interview with us last year, Greene complained that Google had made hiring top talent in Silicon Valley difficult. She now hopes that the IPO will help attract new hires.

EMC plans to reveal more information about the proposed IPO in a regulatory filing.

At first blush, investors appeared to back the deal, sending shares of EMC up 6 per cent in the after-hours market, as of this report.

VMware could use a bit more flexibility and financial muscle as it looks to compete against the likes of Microsoft and XenSource in the coming years. Both rivals have targeted VMware's server virtualization stronghold, while VMware has started to move down market with an assault on the SMB market and plans to expand its desktop virtualization line.

During a conference call today, Greene speculated that the desktop virtualization market could end up being larger than that for servers. ®

The essential guide to IT transformation

More from The Register

next story
The Return of BSOD: Does ANYONE trust Microsoft patches?
Sysadmins, you're either fighting fires or seen as incompetents now
Microsoft: Azure isn't ready for biz-critical apps … yet
Microsoft will move its own IT to the cloud to avoid $200m server bill
Death by 1,000 cuts: Mainstream storage array suppliers are bleeding
Cloud, all-flash kit, object storage slicing away at titans of storage
US regulators OK sale of IBM's x86 server biz to Lenovo
Now all that remains is for gov't offices to ban the boxes
Oracle reveals 32-core, 10 BEEELLION-transistor SPARC M7
New chip scales to 1024 cores, 8192 threads 64 TB RAM, at speeds over 3.6GHz
VMware vaporises vCHS hybrid cloud service
AnD yEt mOre cRazy cAps to dEal wIth
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
7 Elements of Radically Simple OS Migration
Avoid the typical headaches of OS migration during your next project by learning about 7 elements of radically simple OS migration.
BYOD's dark side: Data protection
An endpoint data protection solution that adds value to the user and the organization so it can protect itself from data loss as well as leverage corporate data.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?