Intel's $218.5M stake in VMware to propel virtualization technology

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 7/9/2007

To accelerate adoption of virtualization products on Intel architecture and reinforce the value of virtualization technology, Palo Alto, Calif.-based virtualization software supplier VMware Inc. reported today that Intel Corp., through its Intel Capital investment arm, said it will invest $218.5 million in VMware’s Class A common stock subject to customary regulatory and other closing conditions including Hart-Scott-Rodino (HSR) review.

VMware’s base virtualization platform virtualizes the Intel architecture, and the majority of systems on which its products are deployed are Intel-based.

According to VMware’s website, virtualization is an abstraction layer that decouples the physical hardware from the operating system to deliver greater IT resource utilization and flexibility.

Virtualization technology allows multiple virtual machines, with heterogeneous operating systems to run in isolation, side-by-side on the same physical machine with each virtual machine containing its own set of virtual hardware upon which an operating system and applications are loaded, and the operating system seeing a consistent, normalized set of hardware regardless of the actual physical hardware components.

The company says the benefits of virtualization include the ability to partition jobs so that multiple applications and operating systems can be supported within a single physical system; servers can be consolidated into virtual machines on either a scale-up or scale-out architecture; and computing resources are treated as a uniform pool to be allocated to virtual machines in a controlled manner.

A second benefit to virtualization is that virtual machines are completely isolated from the host machine and other virtual machines. If a virtual machine crashes, all others are unaffected. As well data does not leak across virtual machines and applications can only communicate over configured network connections.

Finally, virtualization allows for encapsulation, whereby a complete virtual machine environment is saved as a single file; easy to back up, move and copy. Standardized virtualized hardware is presented to the application - guaranteeing compatibility, the company added.

VMware said that at the completion of its planned initial public offering and upon closing of the investment, Intel will own approximately 2.5 percent of VMware’s total outstanding common stock, which is less than one percent of the combined voting power of VMware's outstanding common stock. Pursuant to the investment, an Intel executive is expected to be appointed to the VMware’s board of directors.

For its part, Intel said it expects the investment to foster collaboration to accelerating VMware virtualization product adoption on Intel architecture and reinforce the value of virtualization technology for customers.

The companies also said they have entered into a “routine and customary” collaboration partnering agreement that expresses their intent to continue to expand their cooperative efforts around joint development, marketing and industry initiatives.