RealTime IT News

VMware Raises $957M in IPO

VMware shares were sizzling Tuesday morning, hitting $52 a share, a rise of close to 74 percent in early trading. The EMC spin-off debuted Tuesday after an initial public offering (IPO) sale of 33 million shares at $29 each that raised $957 million.

By mid-morning, more than 24 million shares of the Palo Alto, Calif.-based virtualization firm traded hands. Based on the $29 a share IPO and 375.1 million outstanding shares, VMware is pushing a market cap of approximately $11 billion.

Despite the IPO, EMC retains 86 percent economic and 98 percent voting interest in VMware, bought by EMC for $600 million in 2004.

VMware's software is considered the leader in hardware virtualization, which puts multiple separate computing environments onto one computer. This allows one physical server to perform the function of two or more. Virtualization has emerged as a popular strategy for server consolidation, as IT shops struggle with cooling and power consumption.

When EMC purchased VMware, the company had less than $100 million in revenues and fewer than 300 employees. In three years under EMC, the company has boosted revenue to more than $700 million annually and increased the payroll to 3,000 employees.

Since the Hopkinton, Mass.-based EMC outlined plans for an IPO in February, the storage company's stock has been erratic, jockeying up 150 points in one day, only to fall 200 points the next day. In mid-morning trading, EMC was trading at $18.50 a share, down 50 cents a share.

The hot market for hardware virtualization also lured Intel and Cisco into investing in VMware. In July, Cisco put up $150 million for a 1.6 percent stake in VMware, while Intel grabbed a 2.5 percent stake for $218.5 million.

Intel was up 11 cents Tuesday morning at $24.12 while Cisco was down 5 cents at $30.79 a share. issues.