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VMware goes public with $100m plea

Costs and CEO salary way up

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VMware has titillated Wall Street once again with its plans to go public. The software maker today dished up its hopes to pull in $100m from an IPO.

In February, EMC revealed plans to sell 10 per cent of VMware to commoners - or, more accurately, really rich guys working on Wall Street. VMware, a maker of server virtualization software, continues to post stellar results, raising revenue close to triple digits quarter-over-quarter and bringing in about $1bn per year (at its current run rate). Such figures make VMware a standout in the software industry.

EMC investors have reaped little return from VMware's bull run with the storage maker's share price stuck in neutral, despite solid overall performance. So, EMC has gone the IPO route with VMware, hoping to please the faithful.

According to a regulatory filing, Credit Suisse, Merrill Lynch, Lehman Brothers, Deutsche Bank, JP Morgan, and Citi will all have a hand in VMware's IPO. The software maker has yet to pick whether it will list on the NYSE or Nasdaq exchange.

VMware plans to use the IPO funds to repay debt owed to EMC, to buy its headquarters in Palo Alto from EMC, and to hire new staff.

The IPO regulatory filing produced by VMware shows a company with surging revenue and costs. For example, VMware's revenue jumped from $115m in the December quarter of 2005 to $227m in the December quarter of 2006. Over that same period, VMware R&D costs rose from $10m to $50m, while sales and marketing costs rose from $40m to $81m. G&A costs surged as well to $25m from $7m.

The end result?

VMware produced a $31m profit in the 2006 quarter as compared to a $28m profit in the same period the previous year. VMware's president and CEO Diane Greene earned $6.4m in total compensation last year, according to the filing.

As noted in its documents, VMware faces increasing threats from Microsoft, the open source world, and a host of start-ups. The company, however, clearly has the leadership spot in the server virtualization market, which includes software used to run multiple operating systems and applications on a single, physical server. ®

Bootnote

Once again, Sun co-founder Andy Bechtolsheim looks to do well from an investment. He put some of the original money into Sun and Google, among others, and was an early investor in VMware.

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