VMware: All hail the August tech IPO
VMware (VMW) today joins the pantheon of Silicon Valley companies with the audacity to go public not only in the supposed doldrums of summer but in a rotten market to boot. Past honorees: Dearly departed Netscape from 1995 and Google (GOOG), in 2004.
The Palo Alto software shop, a unit of EMC (EMC) burst onto the public markets this morning by trading at $52 after being priced Monday evening at $29. Things have all gone very much as planned for VMware. As I noted in June, anlaysts expected VMware to go public at about $27. Intel (INTC) and Cisco (CSCO) managed to get in before the IPO, buying sizeable stakes at $23 and $25 per share, respectively.
What’s so great about VMware and August IPOs? Let’s take those questions one at a time.
For all the hoo-hah about new this and new that — read: overhyped Web 2.0 companies you’ll never hear about a year from now — VMware actually solves a problem that matters to big technology buyers. Its virtualization approach allows companies with massive server farms to more efficiently use their server capacity. That simultaneously threatens the big server companies like IBM (IBM), Sun (SUNW) and HP (HPQ) and strengthens the market by making servers more valuable. VMware is the “it” company of Silicon Valley right now, again, among real companies that sell real products. Everyone wants to work with them. The company’s growth has been impressive, far better than that of its parent, whose best move of the past half decade turns out to have been buying VMware. (For the numbers on the growth, see the article I did in the print edition of Fortune; It was called “The next big Silicon Valley IPO.” Sometimes we get it right.)
As for August IPOs, is there some kind of magic? Netscape’s bankers told the company it was folly to go public in the heat of the summer. The company was confident. Google never worried about the month it went public. It fretted more over its auction method. Did VMware plan to do its IPO in August and in the midst of a market meltdown? Certainly not the latter. Still, its success today — and let’s remember, to continue to be a success it needs to keep rising, as Google did, not shrivel like Netscape — is a reminder that 1) there is plenty of capital for quality companies and 2) the markets don’t move in lockstep at all times.
will microsoft kill them they now have a console and with one enterprise lic you get 4 vm installs not to mention free physical to virtual conversion.
Google was a successful IPO because the general public was able to buy the stock and reap the growth. VMWare has yet to be successful because the public was only able to buy the stock around $49/share. Success goes to brokerage firms (and their high end clients) who
got in between $29-$49/share.
Do you actually know the history of VM? I doubt it. Does IBM VM ring a bell?
Shrivel like Netscape?
If my memory serves me right, it did pretty good until it was bought out (by AOL?).
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Wall Street watchers think of capital markets and financial players out west as being on the "other" coast. That's not how it's viewed in the Pacific time zone. From the venture capitalists of Sand Hill Road to the bond kingpins of Orange County to the corporate finance department at a certain software company in Redmond, Wash., there's plenty going on "out there." Adam Lashinsky should know. A native of Chicago, he has covered West Coast finance for a decade, with an emphasis on money matters in Silicon Valley. If it involves money and it's happening west of the Mississippi, look for it in Go West. 
VMWare is also useful for users of alternate operating systems (Linux, for the most part) who only need Windows occasionally and don’t want to have to reboot their computer to get to it.