VMware goes public with $100m plea

Costs and CEO salary way up


VMware has titillated Wall Street once again with its plans to go public. The software maker today dished up its hopes to pull in $100m from an IPO.

In February, EMC revealed plans to sell 10 per cent of VMware to commoners - or, more accurately, really rich guys working on Wall Street. VMware, a maker of server virtualization software, continues to post stellar results, raising revenue close to triple digits quarter-over-quarter and bringing in about $1bn per year (at its current run rate). Such figures make VMware a standout in the software industry.

EMC investors have reaped little return from VMware's bull run with the storage maker's share price stuck in neutral, despite solid overall performance. So, EMC has gone the IPO route with VMware, hoping to please the faithful.

According to a regulatory filing, Credit Suisse, Merrill Lynch, Lehman Brothers, Deutsche Bank, JP Morgan, and Citi will all have a hand in VMware's IPO. The software maker has yet to pick whether it will list on the NYSE or Nasdaq exchange.

VMware plans to use the IPO funds to repay debt owed to EMC, to buy its headquarters in Palo Alto from EMC, and to hire new staff.

The IPO regulatory filing produced by VMware shows a company with surging revenue and costs. For example, VMware's revenue jumped from $115m in the December quarter of 2005 to $227m in the December quarter of 2006. Over that same period, VMware R&D costs rose from $10m to $50m, while sales and marketing costs rose from $40m to $81m. G&A costs surged as well to $25m from $7m.

The end result?

VMware produced a $31m profit in the 2006 quarter as compared to a $28m profit in the same period the previous year. VMware's president and CEO Diane Greene earned $6.4m in total compensation last year, according to the filing.

As noted in its documents, VMware faces increasing threats from Microsoft, the open source world, and a host of start-ups. The company, however, clearly has the leadership spot in the server virtualization market, which includes software used to run multiple operating systems and applications on a single, physical server. ®

Bootnote

Once again, Sun co-founder Andy Bechtolsheim looks to do well from an investment. He put some of the original money into Sun and Google, among others, and was an early investor in VMware.

Similar topics


Other stories you might like

  • VMware customers have watched Broadcom's acquisitions and don't like what they see
    It's not hard to find unpleasant precedents for what might happen to Virtzilla

    VMware customers have seen companies acquired by Broadcom Software emerge with lower profiles, slower innovation, and higher prices - a combination that makes them nervous about the virtualization giant’s future.

    The Register offers that assessment after spending the day at a VMware user group conference in Melbourne, Australia, where we interviewed over a dozen VMware customers to ascertain their reaction to Broadcom’s surprise acquisition of the virtualisation giant. The customers all requested that The Register not use their names, or those of their employers, as none were authorized to speak to the media.

    One of those customers was a sysadmin at a sporting organisation that has decided to drop Symantec products because product evolution has slowed under Broadcom’s ownership. The sysadmin has also heard, from multiple sources including Broadcom partners, that the company uses price hikes to discourage customers it does not want.

    Continue reading
  • Confirmed: Broadcom, VMware agree to $61b merger
    Unless anyone out there can make a better offer. Oh, Elon?

    Broadcom has confirmed it intends to acquire VMware in a deal that looks set to be worth $61 billion, if it goes ahead: the agreement provides for a “go-shop” provision under which the virtualization giant may solicit alternative offers.

    Rumors of the proposed merger emerged earlier this week, amid much speculation, but neither of the companies was prepared to comment on the deal before today, when it was disclosed that the boards of directors of both organizations have unanimously approved the agreement.

    Michael Dell and Silver Lake investors, which own just over half of the outstanding shares in VMware between both, have apparently signed support agreements to vote in favor of the transaction, so long as the VMware board continues to recommend the proposed transaction with chip designer Broadcom.

    Continue reading
  • Broadcom to 'focus on rapid transition to subscriptions' for VMware
    Offers comforting vision for core customers, products, channel – though warns efficiencies are coming

    Broadcom has signaled its $61 billion acquisition of VMware will involve a “rapid transition from perpetual licenses to subscriptions.”

    That's according to Tom Krause, president of the Broadcom Software Group, on Thursday's Broadcom earnings call. He was asked how the semiconductor giant plans to deliver on its guidance that VMware will add approximately $8.5 billion of pro forma EBITDA to Broadcom within three years of the deal closing – significant growth given VMware currently produces about $4.7 billion. And subscriptions was the answer.

    Krause also repeatedly said Broadcom intends to invest in VMware’s key product portfolio and is pleased to be acquiring a sales organization and channel relationships that give it reach Broadcom does not currently enjoy.

    Continue reading

Biting the hand that feeds IT © 1998–2022