EMC to launch VMware IPO

With an unexpected move, just few weeks after receiving critics about value of acquisition, EMC just announced it will sell 10% of VMware with an Initial Public Offering.

Quoting from the official announcement:

EMC Corporation, the world leader in information infrastructure solutions, today announced its intention to sell approximately 10% of VMware via an initial public offering (IPO) of newly issued VMware stock. EMC will retain ownership of the remaining shares of VMware, and has no intention of spinning out or otherwise divesting this ownership interest.

VMware had record sales in 2006, growing revenues 83% during the year to $709 million. It finished the fourth quarter of 2006 with year-over-year revenue growth of 101%, delivering accelerating year-over-year growth for the fifth consecutive quarter.

EMC believes the IPO, which is expected to occur this summer, will provide both EMC and VMware with a number of significant advantages including:

  • Improved visibility into VMware’s performance and growth relative to the market
  • Strengthened VMware employee retention and recruitment through a broad-based equity award pool
  • Reinforced commitment to VMware’s open platform strategy

The IPO is not expected to have a material impact on EMC’s 2007 business outlook. VMware will be a publicly traded entity upon completion of the transaction. Tucci and Greene are expected to be named to VMware’s Board of Directors…

The VMware IPO is a remarkable event.

Excluding Google, the Palo Alto company is one of the few IT companies which showing an impressive growth for several years in a row, and which is expected to further grow in the near future thanks to massive virtualization adoption trends research firms like Gartners, IDC and Forrester are reporting since 2003.

Nontheless the operation can hide some risks: current VMware owner, EMC Corporation, is not collecting notable successes in Wall Street since a long time, despite impressive results of VMware and prestigious acquisitions of RSA, NetForensics.

Google Finance helps understanding EMC trends since December 2003, when VMware acquisition boosted stock price to $15.59 in January 2004:

So there is a chance VMware stock could face same kind of acceptance because of EMC ownership. On the other side VMware IPO could improve EMC stock value itself.

Update: Patrick O’Rourke, Senior Product Manager of Windows Server Division, posted some provocative comments about the IPO on the official Microsoft blog.

It’s a worthy reading.

Is Microsoft further influencing this move from EMC? Is this summer the last good chance to launch the VMware IPO before the biggest competitor seriously enters the space with its Windows Server Virtualization hypervisor (codename Viridian)?