The folks that wanted EMC to carve out VMware in an initial public offering are getting their wish. EMC said after market close that it will sell 10 percent of VMware in an IPO.
EMC retains ownership of VMware and noted it has "no intention of spinning out or otherwise divesting this ownership interest." So why is EMC pursuing an IPO for a relatively small stake of VMware? It needs the options to attract software talent.
EMC CEO Joe Tucci said:
"We expect the IPO to unlock more of VMware's value for EMC shareholders while also strengthening its ability to retain and attract the software industry's top talent."
VMware president Diane Greene said:
"It should enable us to accelerate our ability to find and attract great people, continue to invest in great product development, and grow an even stronger partner ecosystem."
VMware also was realizing the limits of being an EMC subsidiary. EMC expects the IPO to improve visibility into VMware's business, strengthen employee retention and recruitment and reinforce the virtualization company's open platform strategy.
"Further reinforces our commitment to running VMware with an open platform strategy that benefits customers and the broader IT industry. Open and equal access has been important to our partners and benefited our customers because of the full and free choice it provides.
Greatly strengthens our ability to execute on all of our promises and continue to deliver on the rich roadmap that we see for virtualization software both through our own products and through open and standards based virtual infrastructure.
Allows VMware to invest in providing you the best customer service, support and experience on a global basis.
Will bring even more focus and enthusiasm and innovation to an already thriving marketplace."
In other words, EMC and VMware reiterated most of the points made by JP Morgan analyst Bill Shope last month. Shope outlined the case for spinning off VMware in early January.
VMware, which is just hitting the sweet spot on its growth curve, had 2006 sales of $709 million. The IPO is expected to launch this summer. Proceeds from the offering will go to VMware to fund its growth.