VMware sets IPO price range; lands Intel Capital as investor

Intel Capital said it will invest $218.5 million in VMware and ultimately own 2.5 percent of the virtualization company's outstanding common stock as it goes public.

Separately, VMware said in a regulatory filing that it will offer 33 million shares priced between $23 and $25 a share. VMware, which will trade under the ticker "VMW," will raise net proceeds of $741.4 million.

With the Intel deal, VMware grabs a significant investor--one that is increasingly important to the virtualization software maker.

Intel noted that VMware primarily virtualizes the chip giant's architecture so it makes sense to make the investment. Intel will have less than 1 percent in voting power.

For VMware the relationship with Intel comes as it's likely to face competition from Microsoft, which is plotting virtualization software, and open source companies like Red Hat.

Bottom line: It's not going to hurt VMware to have Intel in its corner as virtualization competition heats up. In a statement, the two companies said:

Intel's investment is intended to foster strengthened inter-company collaboration towards accelerating VMware virtualization product adoption on Intel architecture and reinforcing the value of virtualization technology for customers.  In addition, VMware and Intel have entered into a routine and customary collaboration partnering agreement that expresses their intent to continue to expand their cooperative efforts around joint development, marketing and industry initiatives.

 For more virtualization news and opinion see Dan Kusnetzky's virtualization blog.