VMW - VMware, Inc - Page 3

LOL

I just got off work about 1 hr ago and playing catch up in the markets right now while following some stocks as we speak.

I was just in a hurry.

EMC Spins Out Of Control?

It's no surprise that EMC Corp. (NYSE: EMC ) wants to do a spinoff of its enterprise software subsidiary, VMware.

These days, sales of VMware's server "virtualization" software are on a tear - revenue could hit $1.2 billion this year. As a result, the deal could unlock plenty of value in EMC stock, which has been trading down for some time. Analysts predict the company could be worth $10 billion.

Why Buy?

Lots of academic studies show that spinoffs, statistically speaking, have a better chance of outperforming the market than the average stock. The big reason, spinoffs frequently receive less publicity or hype than regular IPOs , which can lead to undervaluation.

But, buyer beware. While the timing's probably good for EMC shareholders, it may not be great for buyers hoping to jump into the spinoff's IPO. For starters, the outlook for VMware's software is a tad murky.

David and Goliath

Virtualization software allows customers to dramatically reduce the number of servers they require to run network operations, creating huge cost savings. And the potential market for the software is big - only about 5% of servers employed use it.

Certainly, the technology looks exciting right now, and it will no doubt eat into server sales at hardware makers such as HP (NYSE: HPQ ), Dell (Nasdaq: DELL ), Sun Microsystems (Nasdaq: SUNW ) and IBM (NYSE: IBM ).

But red-hot virtualization is attracting a lot of big competitors. VMware may be on a collision course with Microsoft (Nasdaq: MSFT ), who also has its sights set on the virtualization. The industry Goliath is reportedly taking aggressive steps to limit VMware's ability to maneuver in the server software space. VMware's value could easily slump depending on what Microsoft does down the road.

Growth And Valuation

Then consider VMware's blistering rate of expenditure growth. In 2006, VMware had $704 million of revenue, $121 million of operating income and net income of $87 million. So, revenue was up 82%, operating income 29% and net income 30%. Looking at costs, several line items grew even faster than the rapid rise in revenue, including R&D (up 104%), sales and marketing (up 90%), general and administration (up 127%) and costs of servicing revenue (up 158%).

If that kind of expenditure growth-rate continues, the 26-times forward-earnings multiple that forms VMware's hefty valuation may well be a blip. (To learn more, see our Introduction To The P/E Ratio .)

More worrisome is that none of the money raised from the spinoff will be re-invested in VMware. All of the proceeds will go straight back to EMC as part of an $800 million dividend payment. EMC could be extracting too much from the deal, and leaving VMware short on the cash needed to sustain growth.

Parting Thoughts

Remember, investors gain from spinoffs when the subsidiary gets plenty of autonomy early on. But after the deal, EMC will own all of VMware's 300 million Class B shares giving it 99% of the voting power. This means that, until those shares are redistributed, EMC will exert clout beyond its financial stake. This begs the question, if EMC won't let go of the reins, then why bother having EMC go public?

Think twice before buying into VMware. It's more than just timing. It's about taking time to carefully examine what EMC is selling.

-Investopedia

From Scottrade 7/9/07

EMC's VMWare unit intends to price its pending IPO of class A common shares at $23-$25, with the symbol VMW. VMW will have two classes of common, and EMC will maintain a controlling interest in both, which we view as positive.

An anticipated $741 million proceeds assumes an offering of almost 31 million shares at a price of $24. VMWare's sales nearly doubled in '06, as its software enables IT managers to implement virtualization across storage infrastructures. We lift our 12-month target price for EMC $3 to $20, 23.5X our FY 08 EPS estimate of $0.85, in line with peers.

Sorry, I can't believe I missed this...

Has anyone found a date yet?

EMC Hints At VMWare IPO Date

EMC Corp. (NYSE:EMC) has made an SEC Filing for the proposed dates and averages used to calculate employee share and options exchanges from EMC to VMWare (NYSE:VMW) ahead of the IPO. The final calculated volume-weighted average price of EMC common stock ( "Average VWAP") from which the resulting exchange ratio between EMC common stock and VMware common stock will be derived, will be determined by averaging (taking the arithmetic mean of) the daily volume-weighted average price of EMC common stock for the final two full trading days of the Exchange Offer period. The final two full trading days of the Offer (unless the Offer is extended) will be August 2, 2007 and August 3, 2007. We prdicted a 'second week in August' date as the likely IPO time back on June 27, which turns out to be pretty accurate.

http://www.247wallst.com/2007/07/emc-hints-at-vm.html

Ya, it will be an interesting play.

Cisco Systems To Pay $150 Million For Stake In EMC's VMware

DOW JONES NEWSWIRES Networking giant Cisco Systems Inc. (CSCO) agreed to pay $150 million for a 1.6% stake in "visualization" software maker VMware Inc., a unit of data-storage giant EMC Corp. (EMC).

The deal, in which San Jose-based Cisco will buy $150 million of Class A common shares, comes as VMware is preparing for a closely watched initial public offering. EMC, of Hopkinton, Mass., the world's largest maker of corporate data-storage equipment, plans to spin off 10% of VMware in an IPO.

Earlier this month, chip giant Intel Corp. (INTC) agreed to invest $218.5 million in VMware. The investments are evidence that the hit technology called virtualization is spawning new alliances and posing challenges to Microsoft Corp. (MSFT).

Visualization technology can make one computer function as if it were several. It uses software that emulates the features of a computer, making it easier to run multiple operating systems and application programs on a single machine. That benefits companies by using a greater portion of servers' computing capacity, reducing the need to buy additional systems. Also, the energy savings alone can pay for the cost of the program in a year.

According to Sanford Bernstein analyst Toni Sacconaghi, VMware has a market share of about 85%. About $1 billion worth of virtualization licenses were sold for file servers last year, according to technology industry research firm IDC in Massachusetts. That number looks to grow to about $3.1 billion by 2010, estimates IDC analyst John Humphries.

On Tuesday, EMC said VMware increased sales 89% to $298 million in the second quarter, compared with a year earlier.

Earlier this month, underwriters set VMware's pending IPO at 33 million Class A common shares at an estimated price of $23 to $25 apiece. Following the IPO, VMware will have two classes of stock, Class A and Class B.

Cisco's stake in VMware represents less than 1% of the combined voting power of VMware's outstanding common stock. VMware has agreed to consider naming a Cisco executive to VMware's board at a later date.
Shares in Cisco rose 7 cents in recent premarket activity, to $29.74. EMC was up almost 1% in the premarket, to $18.56.

VMware IPO Set for Aug. 14

EMC's partial spinoff of its VMware division will go public in two weeks, according to MorningNotes.


The initial public offering of 33 million shares in the virtualization software maker will come down Aug. 14 at a range of $23 to $25 each, according to the company.
"I expect it to price higher," said Scott Sweet, managing director at IPO Boutique. "I'd be very shocked, considering the demand for this deal, if it comes at $25." The pricing range is fairly priced, he added.

"I've not heard any more chatter on an IPO since 1999 and 2000" than the buzz that has accompanied VMware, Sweet said...

http://www.thestreet.com/_yahoo/news...&cm_ite=NA

IPO's are very risky for that reason. Look at what happened to Blackstone.

I know Cramer has mentioned this stock before and likes VMware so I wonder if he will pump it as we near the release date.

Recently companies like Intel and Cisco have released that they are purchasing a stake in the company. Does this come out of the planned 10% EMC is selling to us? It would seem a little unfair that companies can buy some shares before the IPO is released taking away shares from us.

Thank you

They are raising the IPO price to 27 to 29 a share from 23 to 25 a share.

Well the whole market tanked. EMC actually has been going down this week adn the only thing I can think of is because they are releasing earnings soon. Only catalyst I can see in the intermediate future.

Doing some research I came across an analyst document saying for every 10 million in revenue (I believe) from VMware is 1 dollar onto EMC's stock.