VMware shares skyrocket with IPO
By Ann Steffora Mutschler, Senior Editor -- EDN, August 14, 2007
Palo Alto, Calif.-based software virtualization technology provider VMware Inc. burst onto the New York Stock Exchange this morning for the first time despite concerns in other financial and real-estate stocks. At 1:00 P.M. E.T., VMware stocks, under ticker symbol “VMW,” were trading at almost $55 per share, nearly double the company's opening price of $29.
The company announced Monday its IPO would be for 33 million shares of its Class A common stock, priced at $29 per share.
This successful IPO signals the acceptance of virtualization technology for use in data centers as an alternative to mainframe computing – and is expected to drive semiconductor purchases due to virtualization’s promise to leverage multicore processors for more cost-effective compute-intensive applications.
According to a report by MarketWatch, with 375.1 million shares outstanding, VMware will carry a market cap of about $11 billion based its $29-a-share IPO price, which is about 17 times the $635 million price that EMC Corp. paid in 2004 to buy the company. EMC is holding on to 87 percent of VMware’s outstanding common stock and 98 percent of the combined voting power of the shares.
VMware reported preliminary Q2 net income of $34.2 million on revenue of $297 million for quarter ended June 30, compared with net income of $15.2 million on revenue of $156 million in Q2 2006.
Late last month, Cisco Systems Inc. said it would purchase $150 million Class A shares in VMware held by its parent for a 1.6 percent stake in a move to collaborate on offering virtualization software to its customers.
Also last month, Intel Capital said it planned to invest $218.5 million for a 2.5 percent stake in the company.
