VMware Hoists Sails With IPO

VMware has filed paperwork with the U.S. Securities and Exchange Commission for its planned initial public offering.

The firm will offer 10 percent of its Class A common stock in the IPO, which will give shareholders of EMC, VMware’s parent company, a boost and help VMware attract and retain the software industry’s top talent, the company said.

VMware makes virtualization software that lets computers run multiple operating systems. EMC purchased the company in 2004 for US$625 million.

“Back in 1998 or 1999 when VMware was launched, there were still people who claimed that the x86 architecture was not appropriate for server workloads,” Charles King, principal analyst for Pund-IT, told TechNewsWorld. “The x86 units were used for used for edge-of-network, low-end, appliance kinds of applications, and VMware came out and said, ‘We’re going to virtualize the x86 space.'”

At the time, King said, “A lot of people laughed them out of the room.”

Fast Forward

The x86 architecture has become increasingly powerful and stable. It is now widely used across enterprises of all sizes. At the same time, VMware is also now recognized as a leader with stable, mature virtualization solutions.

“VMware pretty much owns the market in x86 virtualization solutions at this stage,” King noted. “The company’s earnings last year were in excess of $700 million, and the consensus [among financial analysts] is that its revenues could exceed $1 billion for the first time in 2007. … For a six hundred million acquisition, it’s safe to say EMC hit a home run — make that a grand slam — with VMware.”

Competition Ahead?

VMware’s future is not without competition, however. The biggest potential competitor will likely become Microsoft when it releases Viridian, which is a type of hypervisor that lets a virtualized OS run more directly on server hardware rather than directly on top of the server’s primary operating system.

XenSource, which utilizes the open source Xen virtualization project to offer its XenEnterprise solution, is also a key competitor.

Other potential competitors include Red Hat, Novell and IBM, which provide virtualization solutions for a variety of servers and operating systems.

For the IPO, Citi, JPMorgan and Lehman Brothers are acting as the representatives of the underwriters and, together with Credit Suisse, Merrill Lynch and Deutsche Bank Securities, will act as joint book-running managers of the offering.