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VMware will launch its initial public offering of 33 million shares of company stock starting at the opening of trading Aug. 14, the company announced.
Since amending its prospectus with the U.S. Securities and Exchange Commission on Aug. 9, speculation has grown that the Palo Alto, Calif., company would launch its IPO this week. VMware confirmed that speculation the evening of Aug. 13.
When the opening bell of the New York Stock Exchange sounds Tuesday morning, VMware, which will trade under the symbol “VMW,” will begin selling its stock for $29 a share, according to its statement.
When the company announced changes to its prospectus the week of Aug. 6, VMware executives raised the stock price from an initial offering of between $23 and $25 per share to between $27 and $29 per share, according to its filing with the SEC.
The IPO is expected to infuse the company with plenty of cash, perhaps more than $1 billion, according to some estimates. But the real coup is the announcement, which will raise the profile of the company, and the technology, beyond the IT industry, said Forrester Research Vice President Frank Gillett, who authored a July 9 report on the virtualization industry.
“Basically what the IPO will do is bring VMware to more peoples attention outside of the IT industry,” Gillett said Aug. 13. “It means some extra publicity for the company and it also extends the companys credibility as it looks to create a fabric operating system that can span the entire data center. I also think it might also allow for the rise of another player with an equally ambitious plan for the data center.”
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Virtualization, the ability to run multiple operating systems and applications on the same piece of hardware, is hardly a new technology. IBM first began using virtualization with its mainframe systems in the 1960s.
What VMware has done since it was founded in 1998 is develop a number of products that have allowed it to corner the market in x86 server virtualization at a time when microprocessors and hardware systems have gained enough additional computing power to support the technology in almost any data center or IT environment.
This has allowed VMware to dominate the market far ahead of any competition. The company, which is owned by EMC, reported revenues for the period that ended June 30 of $296.8 million compared with $156.4 million for the same time span in 2006.
The announcement of the IPO has made several other major IT companies stand up and take notice. While EMC will continue to control about 90 percent of VMwares stock, Intel and Cisco Systems have each announced significant investments in the company, which suggests how important virtualization technology will be in the data center.
VMwares IPO is the next logical step for the company, Gillett said. At the same time, the newfound notoriety could put additional pressure on VMware since it sells a good deal of proprietary software and technology, such as its file system, to its customers.
“This IPO is a shift in mind-set, posture and attitude,” Gillett said.
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After the IPO, Gillett said, other companies, such as XenSource or Virtual Iron Software, which both use the open-source Xen hypervisor, could provide compelling alternatives, because their technologies work with other products. Another company, SWsoft, has begun making a compelling case for its Virtuozzo operating-system virtualization software.
On Aug. 13, XenSource, also based in Palo Alto, released the latest version of the XenEnterprise platform, and company executives said they believe the new version will match the latest version of VMwares Virtual Infrastructure suite.
In his report, Gillett wrote that despite solid offerings from Microsoft and XenSource, VMware will likely dominate the virtualization market for several years. The IPO will allow to company to expand and devote more resources to research and development.
Charles King, an analyst at Pund-IT, said if the IPO performs as strongly as expected it will not only show that x86 virtualization is here to stay as a mainstay IT product, but it will also provide a boost to VMwares partners and the industry as a whole.
King also said a successful IPO will help fuel what he called “the next phase of consolidation” in the data center. At the recent LinuxWorld Conference & Expo in San Francisco, King said there was a lot of discussion of how open source and Linux will work with virtualization technology.
“Most of the companies that are leveraging Linux were talking about how virtualization is a highly complementary technology to open-source technology and that the two together form a very powerful approach to IT business consolidation,” King said.
As for some of the other virtualization vendors, King said he does not see any of them as having the ability to take on VMware yet. However, some products may experience a small boost in sales.
“I think some of the Xen-based products will get a little bounce,” King said.
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Editors Note: This story was updated to include information about VMwares initial public offering.