UPDATE 1-VMware IPO prices at $29, high end of forecast

Mon Aug 13, 2007 8:40pm EDT

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(Adds details on offering)

BOSTON Aug 13 (Reuters) - Software maker VMware Inc (VMW.N) went public at $29 a share, or nearly $11 billion, on Monday in the year's most highly anticipated technology stock offering, as the unit of EMC Corp (EMC.N) was sold at the high end of its forecast.

That places the company, which until now has been relatively unknown outside technology circles, among the world's largest publicly held software makers.

Enthusiasm for the offering has been high, analysts say, even at a time when investors are generally skittish amid turbulence in the financial markets. VMware is a potentially attractive holding, they say, because it is the market leader in one of the fastest-growing segments of the computer industry.

A month ago the company forecast its shares would sell for between $23 and $25. Last week, while VMware executives were out on the road explaining the virtualization technology that lies at the heart of all its products, the company raised its estimate for the IPO to between $27 and $29 a share.

Unlike recent hot technology IPOs such as that of Google Inc (GOOG.O), whose products are used by millions of consumers on a daily basis, virtualization is a relatively arcane subject.

But some investors have gotten a crash course on the subject in recent weeks.

Analysts have been talking up the IPO, saying that companies can justify investing in virtualization technology even in times of tight cost controls because it helps save money by reducing the number of computers they needed to run their businesses.

For the past several quarters VMware's sales have doubled from the year-earlier periods as its software has become more widely adopted in corporate data centers, boosting the company's annual revenue to about $1 billion.

Jefferies & Co analyst Katherine Egbert said she expects the stock to post a healthy gain in its trading debut.

"It's a steal up to $35," she said. "It's fully valued somewhere in the mid-$40s."

EMC, the world's biggest maker of corporate data storage gear, sold 33 million class A shares, or about 9 percent of the 375 million shares of common stock in VMware. It also gave underwriters an option to purchase an additional 4.95 million shares.

The spinoff of VMware at nearly $11 billion gave EMC a windfall profit on the Silicon Valley software maker which it bought in January 2004 for $625 million in an effort to diversify beyond hardware.

EMC shares rose $1.33, or 7.5 percent, to close at $19.05 on the New York Stock Exchange on optimism about the IPO.

VMware will trade on the New York Stock Exchange under the symbol "VMW" (VMW.N). The IPO was Led by Citi, JPMorgan and Lehman Brothers.

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