VMware IPO to be biggest in sector since Google

US investors are preparing for what is likely to be the biggest technology listing since Google came to market, as VMware gears up to float 10pc of its shares on the New York Stock Exchange.

The company is one of the hottest software businesses in the world. It makes server virtualisation software, which lets users run a number of functions on a single server, improving its efficiency, meaning businesses require less hardware to do the same amount of work.

Data storage equipment company EMC, which bought VMware for $625m (£310m) last year, is selling 33m shares in the company. Last week, despite volatility in the global financial markets, it raised the projected price range for the IPO to $27-$29 a share, up from $23-$25.

At the mid-point, VMware would have an implied market value of around $10bn, putting it among the world's largest listed software companies.

Brent Bracelin, an analyst at technology-focused investment bank Pacific Crest Securities, said: "They will definitely achieve [the projected range]. It's a highly anticipated offering. This is one of the fastest growing companies in technology."

VMware has around an 80pc market share but the market itself is still small. Mr Bracelin estimates VMware software is installed on just 5pc of the world's 25m standardised servers, but says that could increase to 80pc.

It is thought virtualisation will become mainstream in 2009 and there are fears that its widespread adoption could hit server sales.

A number of major technology companies have already shown their interest in the company's growth prospects. Chip-maker Intel bought a 2.5pc stake in for $219m last month, and networking company Cisco Systems paid $150m for a 1.6pc stake.

Last month, VMware posted a 33pc increase in second-quarter net income to $334m on revenues up 21pc at $3bn. Its rivals include Microsoft and some smaller privately-owned companies.

The flotation comes in a period of extreme market turbulence. The Dow Jones fluctuated by almost 300 points last week. Yesterday it was up 44 points in afternoon trade at 13284.


Source:www.telegraph.co.uk