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IPO - Monday, July 9, 2007

Intel Pays $219M For Shares/Board Seat Just Prior To VMWare IPO

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Intel says it will invest about $219M for a stake in EMC spin-off VMware and will take a seat on the board. VMWare's impending IPO was already expected to be stellar but this deal moves the needle up even further.

The investment is intended to speed adoption of VMware's software technology on computers using Intel semiconductors, expanding an ongoing strategic relationship.

Intel will pay $23 a share for 9.5M common shares in VMware, giving it 2.5% of all outstanding common stock.

VMware also said that it expects to sell up to 37.95M shares to the public for an estimated price of between $23 and $25 per share.

The relationship between Intel and VMware represents a rift in the Wintel alliance. VMWare's software takes processing power on a business computer that isn't being used. It turns that computer into multiple "virtual" machines, reducing the amount of equipment that companies need to buy and maintain in data centers. Microsoft sells similar technology but it lags well behind VMware.

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