VMware comes of age in IPO

In what must have been one of the most closely watched events involving a technological company this year, VMware launched its IPO on the NYSE (New York Stock Exchange) just yesterday.

The initial sale price of $29 per share for 33 million shares is expected to raise more than $900 million in capital. According to eWeek, VMware’s estimated worth now stands at more than $10 billion, with juggernaut EMC controlling about 90 percent of the stock.

By the end of the trading day, the stock price has risen and stood at $51 per share.

If you recall, VMware was founded in 1998, catching on first with hobbyists, then system administrators and CIOs who saw the potential in the then non-existence niche of x86 virtualization. For those who literally “grew up” with using VMware’s products, a touch of nostalgia here is inevitable.

While virtualization in general has been around for ages, especially in mainframes, VMware was the one who brought it into the mainstream. VMware of today is hardly the fledging start-up with a product in search of a problem. The market has matured significantly since, and the opportunities are simply staggering.

Still, as a direct result of VMware’s own success, the competition has finally awoken. Top league players flush with billions in their pockets have joined in the fray — and they are playing for keeps, not just a mere slice of the pie.

Also, the continual incorporation of virtualization into both hardware in the form of microprocessors, and software, in the form of the free Linux kernel, is threatening to make the need for a separate virtualization product irrelevant. To thrive, VMware must continue to lead the industry, and if at all possible, even speed up the pace of its innovation even further.

This is echoed by Greene, who oversaw the IPO as president and CEO of VMware:

We have very consistently explained to everyone that we will continue to invest quite heavily in [R&D] because we do have such a rich road map…

We also will continue to increase the reach of our products… [to] further unlock all the value in the virtualization platform… There is still a lot to be done there to fill that out and strength how we make things highly available, disaster recovery-tolerant and secure.

Adding on, Tom Bittman, a vice president and chief of research at Gartner said that VMware would be wise to invest some of the money gained through the IPO in a new consulting force as well as look for key acquisition to bolster its business.

At the moment, the biggest challenge to VMware is believed to be from Microsoft Windows Server 2008 with its own “Viridian” hypervisor, which is expected to debut as a beta before the end of this year.

And of course, Citrix is making its move as well in Citrix to acquire XenSource in deal worth $500 million.