Offtopic: VMWare IPO

13 08 2007

I’m going to digress from storage for a moment to discuss current events. In case you didn’t know, VMWare is going to become a public company tomorrow. I have been following this for several months as both an amateur investor and someone who deals with VMWare professionally, and I’ve been seeing lots of questions online about the IPO so figured I’d put together a quick post about some of the basics.

First, VMWare sells a software suite that allows multiple workloads to co-exist on the same Intel hardware. This is significant because Intel servers normally can not run more than one application at the same time, and Intel hardware is getting more powerful faster than applications can grow their basic requirements. Other platforms (like Unix and mainframe) were built from the ground up to do more than one thing at a time, but Intel cut its teeth in the desktop market, so did not inherit this quality. Now that Intel servers are powerful and reliable enough to trust many important company applications to, VMWare helps companies bring their average resource utilization from 10% up to 80% or higher by consolidating many light workloads onto the same physical machine.

VMWare is owned by EMC, a prominent storage solutions company. VMWare has been growing by leaps and bounds, and EMC wants to ensure that their investors can clearly see this jewel in their crown. Thus, they have decided to spin off about 10% of the VMWare stock publicly. Recently, Intel and Cisco both stepped up to the plate to buy a piece of VMWare before it went public.

EMC bought VMWare in 2004 for a steal, but had to agree to keep their noses out of VMWare’s business. This is relevant to VMWare’s bottom line because the biggest competitive differentiator they have with all the other virtualization solutions (like Xen and Microsoft) is that due to their two year head start, they have a massive list of solutions they’ve worked hard to ensure compatibility with (which includes some serious competitors to EMC). If your company uses a mainstream application and wants to run it under VMWare, chances are they’ve tested it and invested time and money into making sure it will work. Of course, they also have a head start in some of the niftier features like the ability to move around working applications from one server to another, but these features will eventually be canon for all virtualization while their partner ecosystem will still be years ahead of their competitors.

I think this addresses some common questions I’ve seen about VMWare and this IPO, but if anyone needs clarification, this is a Q&A blog, so ask away.