VMware Buys 5 Percent Stake in Terremark

Virtualization market leader VMware (VMW) will acquire a 5 percent equity stake in managed hosting provider Terremark Worldwide(TMRK) for $20 million, the two companies said today. Under the agreement, VMware will purchase 4 million shares of newly issued Terremark common stock at $5 per share. The investment is likely to raise Terremark’s profile as a provider of virtualization and cloud computing services. Shares of Terremark closed today’s session at $4.80 a share, up 44 cents for a gain of 7.3 percent.

“VMware has worked closely with Terremark for years, and during that time it has distinguished itself as a leader in delivering VMware virtualization, security, and business continuity to customers of all sizes and in all industries,” said Dan Chu, Vice President of Emerging Products and Markets. “This investment in Terremark underscores the importance of this partnership and our belief in their ability to leverage our technologies as part of the VMware vCloud initiative to develop reliable and scalable cloud computing solutions.”

Roundup: VMware Launches VSphere 4

Virtualization market leader VMware (VMW) today unveiled VSphere 4, the cloud-focused next-generation of its infrastructure management software. VMWare describes VSphere as “the industry’s first cloud operating system, transforming IT infrastructures into a private cloud — a collection of internal clouds federated on-demand to external clouds—delivering IT infrastructure as an easily accessible service.”

“By giving IT organizations a non-disruptive path to cloud computing, we will be leading our customers on a journey that delivers value every step of the way, delivering up to an additional 30 percent cost reduction today while enabling IT to provide reliable and adaptable IT services.” said Paul Maritz, president and chief executive officer of VMware.

Here’s a roundup of some of the analysis and commentary about VSphere 4.

• The Register: “The vSphere stack embodies a strategy and product set that VMware used to call the Virtual Data Center Operating System, or VDC-OS. Now, says Bogomil Balkansky, vice president of marketing at VMware, it goes by the name Cloud OS.”
• The Wall Street Journal: “VMware said that for large data centers, the new products will cost from $795 to $3,995 per server, depending on what features the customer wants. As part of the announcement, VMware said it is also selling a small-business product that Mr. Maritz called “always-on, IT in a box,” which permits a small business with just a few servers to create a virtual data center.”
• eWeek: “In short, VMware wants to become the system of choice to run enterprise data centers, and further, to enable these complex systems to reach out and touch others in order to gain business advantages.”
• Network World: “VSphere will let customers create a single computing pool consisting of as many as 32 physical servers and 2,048 processing cores, 1,280 virtual machines (VM), 32TB of RAM, 16 petabytes of storage and 8,000 network ports, according to VMware.”

For further reading, check out VMware’s VSphere resources and Webcasts, which links to lots more information.

VMware Shares Drop Below IPO Price

What a difference a year makes. The VMworld 2007 show generated excitement about the future of virtualization, prompting investors to bid up the price of the newly-public VMware (VMW). By November 2007, the company’s stock was trading at $124 a share.

Today marked the first day that VMware shares have fallen below their IPO price of $29. This afternoon VMW is down $5.00 at $26.98 a share, a one-day drop of 16 percent. It’s clearly not alone, as the current turmoil on Wall Street is battering many companies. It’s a sobering reminder that the technologies showcased at VMworld 2008 will be marketed and deployed in a tough market in which long-held assumptions can change overnight.

Cisco Unveils Virtual Switch for VMware

Cisco Systems today announced its long-expected virtual software switch, the Nexus 1000V, which will become an integrated option in the VMware Infrastructure virtualization environment. The two companies made the announcement in a keynote at the VMworld 2008 show, where they also unveiled collaborations to help enterprises virtualize their desktops and train resellers in data center virtualization strategies.

The announcement is  the latest step in Cisco’s Data Center 3.0 initiative, and aligns with VMware’s vision for virtual machines to become the building blocks for the next-generation data center. It also deepens the partnership between VMware (VMW) and Cisco (CSCO) , providing each with a powerful ally in their respective ambitions in the data center.

The Nexus 1000V will extend Cisco’s security, policy enforcement, automated provisioning and diagnostics features into VMware environments that can scale to thousands of virtual machines (VMs). The new Cisco Virtual Network Link (VN-Link) technology on the Nexus 1000V will integrate with VMware’s vNetwork Distributed Switch framework to create a logical network infrastructure.

Rosenblum Leaves VMware

Mendel Rosenblum, the co-founder of VMware, has resigned his post as Chief Scientist and left the company.

The departure of Rosenblum is not a surprise, coming just two months after the board fired his wife and co-founder Diane Greene as CEO. Rosenblum’s exit comes at an awkward time, becoming public just ahead of next week’s VMworld trade show in Las Vegas, where a record crowd of 14,000 attendees is expected. Rosenblum’s resignation was reported in a New York Times story about the ongoing fallout from Greene’s firing, which also noted that VMware recently lost another key executive, Executve Vice President of R&D Richard Sarwal.

The Times story also includes an account of Greene’s July 7 firing:

After Ms. Greene made a special presentation to VMware’s board, (Joseph) Tucci, who heads VMware’s parent company, EMC, pulled her aside, according to people familiar with the events, who asked for anonymity because they were not authorized to discuss internal company decisions. Inviting Mendel Rosenblum, Ms. Greene’s husband and the co-founder of VMware, into the room, Mr. Tucci told Ms. Greene she was fired, effective immediately. And he said the board wanted Mr. Rosenblum, VMware’s chief scientist, to take her seat on the board. Mr. Rosenblum declined the offer.

Here’s a quiz for married guys: If someone fires your wife and then immediately turns and offers you her position, what do you do? How did Tucci expect Rosenblum to respond?

His final answer came last night. It will be interesting to see whether Rosenblum’s departure is already built into VMware’s stock price.

Traders Betting on EMC Spinoff of VMware

Is EMC ready to spin off VMware? These rumors have been around before, and got a lot of attention following the surprise exit of VMware CEO Diane Greene. The New York Times called Greene’s dismissal a “dramatic gesture” by EMC to silence talks off a spinoff.

If so, it didn’t work. Wall Street watchers are again focused on VMware spinoff rumors after an unusual surge in purchases of call options in EMC stock, according to the Wall Street Journal. Call options are a bet that shares will rise in value. On Wednesday traders bought more than 350,000 EMC calls, outnumbering bearish “puts” more than three to one. “Somebody is taking a huge bet that these shares are about to rally,” Joe Kinahan, chief derivatives strategist with Thinkorswim, told the Journal.

VMware Plans Major Data Center in Wenatchee

VMware has become the latest tech titan to locate a major data center in central Washington. The virtualization market leader will lease more than 100,000 square feet of space in a new facility being built by Sabey Corp. in its Intergate.Columbia development in East Wenatchee, Wash.

The huge lease is another big win for Sabey, which has already leased the entire first building at Intergate.Columbia to T-Mobile. The VMware deal means that Sabey has pre-leased the vast majority of space at Intergate.Columbia. The VMware lease, which was reported today by the Wenatchee World, will take up about two-thirds of the 189,000 square foot second building.

VMware joins a growing list of companies that are building or leasing data center space in central Washington, where cheap hydro power from the dams along the Columbia River has proven to be a magnet for massive data center projects. Microsoft, Yahoo, Intuit, Ask.com and Base Partners already have data center projects in the area.

VMware Bombshell: The Day After

What’s the real story behind the ouster of VMware CEO Diane Greene? The analysis from VMware watchers is focusing on two issues: whether VMware should be spun off or sold, and tensions between Greene and EMC chairman Joe Tucci. Here’s a roundup:

• Greene’s exit is a “dramatic gesture” by EMC to silence talks off a spinoff, according to the New York Times.
• Was a spinoff of VMware ever in the cards? Speculation of a spinoff boosted EMC’s shares in May, and prompted at least one analyst to raise his rating on EMC. Most of the chatter has focused on Intel and Cisco, which each bought stakes in VMware prior to its IPO.
• The Register focuses on the rumored tensions between Greene and Tucci. “It’s nothing less than shocking that Tucci would push to remove Greene just as VMware needed her most,” writes Ashlee Vance. “Here comes Microsoft with Hyper-V finally ready, and you’re going to rattle the whole ship because of a personality conflict?”