EMC to Sell 10% of VMware in IPO

By Chris Preimesberger  |  Posted 2007-02-07 Print this article Print

The world's storage market leader says it intends to retain 90 percent ownership of the virtualization leader and wants to invest in VMware to help "realize its full potential in the marketplace."

Data storage giant EMC revealed Feb. 7 that it intends to sell approximately 10 percent of its rapidly growing VMware subsidiary through an initial public offering of newly issued VMware stock. EMC will retain ownership of the remaining 90 percent of VMware. President and CEO Joe Tucci said in a conference call that the Hopkinton, Mass., corporation has no intention of spinning out or otherwise divesting this ownership interest. The IPO will be held this summer, he said. "VMware is a precious asset to EMC," Tucci said. "We will retain control of VMware, mainly for three reasons: We want to continue to unlock value for EMCs shareholders; we want to strengthen the retention of our employees at VMware and be transparent about our relationship; and we want to reconfirm our commitment to VMwares platform-neutral approach to network infrastructure."
VMware is the global marketshare leader in software for industry-standard virtualized desktops and servers and is currently a wholly owned subsidiary of EMC.
Click here to read more about EMCs business strategy for 2007. VMware had record sales in 2006, increasing revenues 83 percent during the year to $709 million. It finished the fourth quarter of 2006 with year-over-year revenue growth of 101 percent, delivering accelerated year-over-year growth for the fifth consecutive quarter, Diane Greene, VMwares president and EMCs executive vice president, said during the call. "We expect that the IPO will help us execute on our vision of an industry standard virtual infrastructure," Greene said. "It should enable us to accelerate our ability to find and attract great people, continue to invest in great product development and grow an even stronger partner ecosystem." VMwares products have saved organizations of virtually all sizes and industries millions of dollars in hardware and operational expenses, power and cooling costs, and reduced downtime expenses, Greene said. David Goulden, executive vice president and chief financial officer for EMC, said the proceeds from the transaction are expected to provide VMware with the financial resources it needs to "achieve its full growth potential." The IPO is also expected to provide EMC with the potential to return a portion of the original investment in VMware to EMC shareholders, "while enabling it to retain majority ownership in this strategic EMC business," Goulden said. The IPO is not expected to have a material impact on EMCs 2007 business outlook, Tucci said. VMware will be a publicly traded entity upon completion of the transaction. Tucci and Greene are expected to be named to VMwares board of directors, a company spokesperson said. Check out eWEEK.coms for the latest news, reviews and analysis on enterprise and small business storage hardware and software.
Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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