Intel snaps up VMWare stake

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Chip maker Intel has taken a 2.5 per cent stake in virtualisation software company VMWare and a seat on the board of the company.

VMware's parent company storage giant EMC is planning to IPO the company and Intel will take a stake in VMWare following the completion of the public offering.

The chip manufacturer will pay $23 (£11) a share for 9.5 million common shares, which will be worth around $219 million (£110 million). The completion of the deal is subject to US government regulatory reviews, and will value the whole of VMware at $8.76 billion (£4.38 billion).

In a regulatory filing, the virtualisation software company detailed new information about the IPO and said it expected to sell 37.95 million shares in the company with a price tag of around $24 per share.

VMWare said in a statement that Intel's investment in the company is intended to "foster strengthened inter-company collaboration towards accelerating VMware virtualization product adoption on Intel architecture and reinforcing the value of virtualization technology for customers."

SWSoft, one of VMWare's rivals in the virtualisation market and one in which Intel invested in 2005, said that Intel's support for the company would be invaluable. SWSoft makes Parallels, which allows Mac users to run a copy of Windows XP or Vista on a virtual machine. VMWare has a similar product for the Mac market called Fusion.

"The monetary investment we received from them in 2005 was great, but the active working relationship we've shared is of higher value," said Serguei Beloussov, chief executive of SWSoft.

"Virtualisation is all about getting more from your computing power, so collaborating with the company providing much of the technology at the heart of this makes perfect sense. For us, working with Intel means we are able to make our products more effective, and bring them to market quicker," he said.

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