VMware to raise USD957 million from IPO

14-08-2007

by Stephen Errity

Virtualisation software firm VMware is poised to raise USD957 million in an IPO after its shares were priced higher than the company had previously expected.

The company announced Tuesday that the 33 million shares on offer had been priced at USD29 each. Analysts are expecting the shares to increase in value by several dollars over the opening price on Wednesday, the first day of their trading on the New York Stock Exchange.

VMware's underwriters have the option to purchase an additional 4.95 million shares if demand warrants, bringing the total amount raised to USD1.1 billion. This would make it the biggest share sale since Google's floatation in 2004. The shares offered represent a 10 percent stake in the company, valuing it at close to USD11 billion. That figure places the company, which until now has been relatively unknown outside technology circles, among the world's largest publicly-held software makers.

Last month the company forecast its shares would sell for between USD23 and USD25. That estimate was raised to between USD27 and USD29 last week. The IPO (initial public offering) was first announced in April of this year and at the time the company said it was hoping to raise USD100 million from the offer. It added that it was planning to use the IPO funds to repay debt owed to parent company, EMC; to buy its headquarters in Palo Alto, California from EMC; and to hire new staff.

VMware was founded in 1998 and was acquired by the data storage giant EMC in 2004. The company has enjoyed growth of 75 percent per year for the past three years and looks set to post revenue in excess of USD1 billion this year. VMware develops virtual infrastructure software, which enables multiple virtual machines to be run on a single physical server. The firm claims this allows for more effective and more efficient use of customers' server hardware resources.

In February of this year, VMware announced the creation of 369 new jobs at its technical support centre in Ballincollig, Co. Cork. The facility was established in 2005 to provide technical support to its customers in the Europe, Middle East and Africa (EMEA) region.