Fast-growing software firm set for stock market

Wall Street is braced this week for the most anticipated technology initial public offering (IPO) in years as VMware, a fast-growing software company, prepares to float 10 per cent of its shares on the stock market.

VMware, maker of "virtualisation" software that greatly increases the efficiency of big computer systems, has attracted huge attention from companies as they race to cut costs and boost computing capacity.

Companies that use its software can run a number of functions on a single server, meaning they need fewer pieces of hardware.

This has sent tremors of concern through traditional server and software suppliers.

VMware, a wholly-owned subsidiary of EMC Corporation, plans to float about 33 million shares on the New York Stock Exchange as early as tomorrow.

The flotation could be the biggest technology IPO since Google made its stock market debut in 2004.

"Virtualisation is one of the fastest-growing areas in the tech sector - a fact that should lead to significant investor interest in VMware," said Toni Sacconaghi, an analyst at Sanford Bernstein, in a research note.

VMware, which operates as an independent subsidiary of EMC, the data storage equipment company, last week raised the projected price range of its IPO to $27-$29 a share, up from $24-$25.

The increase came in spite of uncertainty on global stock markets in the wake of the subprime mortgage crisis in the United States.

The company could raise more than $950 million (€693 million) if its shares price at the top of that range. That would imply an overall value for the company of nearly $10 billion.

VMware's public offering has attracted the attention of a number of leading big technology companies.

Intel, the chipmaker with a large base in Ireland, bought a 2.5 per cent stake in VMware last month for $219 million.

Cisco Systems, a networking company, acquired 1.6 per cent of VMware for $150 million.

While only about 3 per cent of the world's servers use virtualisation software today, some analysts expect that number could increase 10-fold over the next several years.

Founded eight years ago, VMware was acquired by EMC for about $635 million in early January 2004.

This IPO would make it one of the world's biggest publicly-held software makers, behind Microsoft, Oracle, Adobe and Symantec.

- (Financial Times service)