In an interesting twist, EMC Corporation, an information infrastructure solutions specialist, announced its intention to sell approximately 10% of VMware via an initial public offering (IPO) of newly issued VMware stock. This shows that the Virtualisation segment is heating up and VMware would probably be better spun out rather than kept within EMC.
EMC will retain ownership of the remaining shares of VMware, and has no intention of spinning out (ed: for now) or otherwise divesting this ownership interest. VMware is the global leader in software for industry-standard virtualized desktops and servers and is currently a wholly-owned subsidiary of EMC.
Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, "VMware is one of the fastest-growing businesses in the history of the software industry. We expect the IPO to unlock more of VMware's value for EMC shareholders while also strengthening its ability to retain and attract the software industry's top talent."
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.
Diane Greene, VMware President and EMC Executive Vice President, said, "VMware has secured its leadership position in the virtualization market through industry-leading and award-winning products. Our focus on people, innovation, and the customer adoption of our products has enabled us to continue to grow our company and deliver significant value. We expect that the IPO will help us execute on our vision of an industry standard virtual infrastructure. It should enable us to accelerate our ability to find and attract great people, continue to invest in great product development, and grow an even stronger partner ecosystem."
VMware's products have saved organizations of virtually all sizes and industries millions of dollars in hardware and operational expenses, power and cooling costs, reduced downtime expenses, and improved desktop manageability. VMware has brought these savings to customers through innovative and groundbreaking products that have a reputation for quality and excellence. In 2006, VMware received 30 awards for innovation and product excellence, including eWEEK's award for being one of the most 25 influential products of the past 25 years.
David Goulden, EMC Executive Vice President and Chief Financial Officer, said, "The proceeds from this transaction are expected to provide VMware with the financial resources it needs to achieve its full growth potential. The IPO is also expected to provide EMC with the potential to return a portion of the original investment in VMware to EMC shareholders, while enabling them to retain majority ownership in this strategic EMC business."
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.
Tucci continued, "We are dedicated to VMware's open platform strategy and partnerships with industry-leading technology companies both large and small. VMware's open platform strategy is critical to the growth of virtual infrastructure as an industry standard layer that benefits all customers and partners."
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.