Intel Investing $200 Million in VMware

Intel is investing more than $200 million in virtualization leader VMware, it announced July 9, giving the chipmaker a 2.5 percent stake in the company.

Both companies said in a joint statement they expect the partnership to help accelerate the adoption of VMwares virtualization technology, but declined to elaborate.

VMware is the market leader in virtualization, which allows a PC or server to run multiple operating systems at the same time. While its technology works with all major microprocessor manufacturers, including those of Intels main rival—Advanced Micro Devices— Intel-based machines account for the “majority” of systems that use VMware products, both companies said in a joint statement.

The $218.5 million investment and 2.5 percent ownership means an Intel executive will sit on VMwares board of directors post IPO.

News of the infusion comes as parent company EMC prepares to sell off 10 percent of VMware in its IPO sheduled a few weeks from July 9. Currently, the Palo Alto, Calif.-based company is a wholly owned subsidiary of EMC.

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A portion of the companys stock will be set aside for VMwares employees, and EMC, which is based in Hopkinton, Mass., will control the vast majority of the companys stock.

A VMware spokesperson declined to comment on the investment, citing the upcoming IPO.

EMC originally bought VMware in 2004 for a total of $635 million. By the end of 2006, its revenues had increased about 83 percent for a total of $703 million.

VMWare is considered the market leader, but competitors, such as Virtual Iron, SWsoft and XenSource, are beginning to offer increasingly viable alternatives to VMwares products. Additionally, OEMs Hewlett-Packard, Sun Microsystems and IBM have begun investing in the virtualization capabilities of their own hardware and software products.

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