EMC to sell $218.5m stake in VMware to Intel
EMC Corp. of Hopkinton is selling a $218.5 million stake in its VMware Inc. software subsidiary to chip maker Intel Corp. The move comes as EMC prepares to raise up to $949 million by selling about 10 percent of VMware to the public.
VMware yesterday said it plans to sell 33 million shares of common stock to the public, with an option to sell up to 4,950,000 more shares if the public offering is oversubscribed. The shares will be priced at $23 to $25. No date for the offering was disclosed, but the company expects it to take place sometime this summer.
VMware makes "virtualization" software that dramatically increases the number of tasks that can be performed on a single computer. Companies around the world are embracing virtualization because it lets them buy fewer computers and cut energy costs.
EMC, the leader in high-end data storage systems, purchased VMware for $625 million in 2004, and it soon became one of EMC's fastest-growing businesses. Last year, VMware's revenue climbed 83 percent, to $709 million. In February, EMC said it would sell about 10 percent of VMware's stock to the public as a way of cashing in on the company's rapid growth. Based on EMC's asking price for the shares, VMware is now worth up to 15 times what EMC paid for it.
The deal with Intel will give the chip maker a 2.5 percent interest in VMware, and a seat on the company's board of directors. Although virtualization could reduce demand for Intel's popular microprocessors, the company has embraced the technology, redesigning its processors to make them run virtualization software more efficiently. "Virtualization is another use for the horsepower that Intel can provide," said Intel spokesman Tom Beermann.
Tom Bittman, vice president at research firm Gartner Inc. in Stamford, Conn., praised the Intel investment in VMware, but wished EMC would go further in reducing its hold on the fast-growing company.
"I would like to see EMC become a minority owner over time," said Bittman, because he fears EMC has become addicted to VMware's strong revenues.
VMware officials declined to comment, citing a legally mandated "quiet period" prior to the company's stock offering.
Meanwhile, EMC will today disclose an alliance with Microsoft and network hardware maker Cisco Systems Inc. to provide technology for the secure storage and sharing of information between government agencies.
Three other companies, including Liquid Machines Inc. of Waltham, will contribute additional technology to the system, called the Secure Information Sharing Architecture.
Under development for two years, the system is supposed to help workers find and access vital information, even when it's held by a different branch of government. At the same time, the system is designed to ensure that the information is kept secure, and shared only with workers who are entitled to see it. "It is an incredibly big task," said Mark Colburn, vice president of EMC's federal government business unit.
The secure system relies on enhancements to existing EMC, Cisco, and Microsoft products, allowing government agencies to continue using their current technologies.
Other hardware and software companies will be able to join the alliance to make their products compatible with system standards.
Hiawatha Bray can be reached at bray@globe.com. 