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.
Posted by Rich Miller 
July 31, 2008 | Permalink | Newsletter
July 28, 2008
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.
Posted by Rich Miller July 28, 2008 | Permalink | Newsletter
July 09, 2008
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?"
Posted by Rich Miller July 09, 2008 | Permalink | Newsletter
July 08, 2008
VMware Surprise: Greene Out as CEO
Virtualization market leader VMware (VMW) announced that President and CEO Diane Greene has departed and been replaced by Paul Maritz, a Microsoft veteran who has most recently been in charge of the cloud computing operation at EMC, VMware's parent company.
VMware's release also said that "revenues for the full year of 2008 will be modestly below" the 50 percent growth seen in 2007. The switch comes as Microsoft is finally bringing its Hyper-V virtualization technology to market, posing the largest competitive threat yet to VMware's leadership in the sector.
Greene co-founded VMware with her husband, Mendel Rosenblum, who serves as chief scientist and is a prominent advocate for the company's technology. VMware watcher Alessandro Perilli of Virtualization.info noted that Greene had been a popular CEO. "This replacement, if imposed by the parent company EMC, may have a huge domino effect on the whole VMware management team," Perilli writes.
Shares of VMware are off sharply on the news. In early afternoon, VMW is trading at $39, down $14.36 for a decline of 27 percent.
Posted by Rich Miller July 08, 2008 | Permalink | Newsletter
January 29, 2008
VMware Shares Plunge 33 Percent
Shares of virtualization market leader VMware (VMW) are off $27.75 to $55.25 as of mid-afternoon, a drop of 33.5 percent. The plunge began in after-hours trading yesterday after VMware lowered its revenue guidance for 2008 and reported fourth-quarter revenue that fell $5 million shy of expectations. That disappointment, coming in the wake of the surge in valuation of VMware shares since its IPO last August, set the stage for a huge selloff.
Eric Savitz at Tech Trader Daily rounds up the reaction from Wall Street analysts that follow VMware. He leads off with John DiFucci of Bear Stearns, who cut his price target for VMware from $132 to $106 - still nearly twice the current price of the stock. For more perspective, see the transcript of yesterday's analyst conference call by VMware executives.
Posted by Rich Miller January 29, 2008 | Permalink | Newsletter
October 01, 2007
VMware Windfall for Cisco, Intel Hits $1B
VMWare shares gained another $3.62 per share today to $88.62. Among the happy shareholders are Intel (INTC) and Cisco (CSCO), who will reap one-day paper gains of $34.4 million and $22.6 million, respectively. Not bad for a day's ticker watching. The two tech titans have made out well on their pre-IPO investments in VMWare, as noted recently by the Deal Journal blog. There are compelling strategic rationales for the investments in VMWare (VMW), the virtualization market leader. But the bottom line has turned out nicely as well.
Shares of VMWare have gained tripled since the EMC unit went public at $29 a share on Aug. 14. Intel paid $23 a share for its 9.5 million stake in VMWare, which translates into a gain of $623 million since the IPO. Cisco invested $150 million and is now ahead $410 million on its VMWare shares. That's a combined $1.03 billion in paper profits between them.
Posted by Rich Miller October 01, 2007 | Permalink | Newsletter
September 11, 2007
VMware Acquires Dunes Technologies
VMware spiced up its VMWorld 2007 conference with some news of its own, saying it has acquired Dunes Technologies, a company that provides IT process orchestration software for virtual environments. Terms of the deal were not disclosed. Orchestration - the intelligent monitoring and management of complex virtualized environments - has gotten more attention recently after featuring prominently in Cisco's announcement of its Data Center 3.0 strategy. In announcing the deal, VMware's Raghu Raghuram cited the importance of orchestration as virtualization becomes more widely implemented.
"As customers move toward large-scale virtual infrastructure deployments, they need solutions that allow them to maintain control over a growing number of virtual machines," said Raghuram, vice president of products and solutions at VMware. "Dunes has developed a powerful orchestration platform that will allow us to automate the entire virtual machine lifecycle from requisition to de-commissioning, while complementing existing VMware management and automation solutions such as VMware Lab Manager and the recently announced VMware Virtual Desktop Manager."
Posted by Rich Miller September 11, 2007 | Permalink | Newsletter
August 20, 2007
Data Center IPOs of 2007
Was last week's blockbuster IPO by VMWare a special case? Or are the turbulent financial markets still welcoming for technology IPOs? As the leading player in a hot technology niche, VMWare (VMW) was bound to attract strong investor interest. Even the timing of its debut couldn't subdue that enthusiasm. As the markets fluctuated wildy on the latest news and rumors about the subprime mortgage market, VMWare nonetheless had a first-day gain of 75 percent, closing at $51 a share, up $22 from its $29 IPO pricing. That followed strong initial offerings for Limelight Networks (LLNW) and BladeLogic (BLOG).
But have these shares been able to sustain their gains through the recent market volatility? Here's a quick look at how 2007's data center IPOs have fared since going public:
Posted by Rich Miller August 20, 2007 | Permalink | Newsletter
February 24, 2007
Virtual Machines 101: VMware vs. Microsoft
Have you ever had trouble explaining virtualization, and why it matters? It's not always a user-friendly topic for non-geeks. Steve Lohr's profile of VMware in today's New York Times provides an excellent overview of virtualization and its significance in the next few years, especially for data center management. It's a great link to share with friends or colleagues who are still coming up to speed on virtualization, or who struggle to get past the jargon and gain clarity on key concepts. Here's an excerpt:
A virtual machine essentially mimics a computer so that several copies of an operating system — say, Windows or Linux or both — can run on one physical machine. It allows computing chores to be done on fewer computers, using less electricity and taking up less space, promising a way to control costs at corporate data centers straining to keep up with the ever-increasing demands of the Internet age.The story also provides a high-level overview of the competitive landscape in the virtualization market, nestled within the framework of a favored tech journalism storyline - the upstart company "taking on" Microsoft. It's a worthwhile read, although I think describing VMware as a "young Silicon Valley company" probably provides more journalistic juice than the more accurate "a business unit of storage giant EMC." See additional discussion at Michael Parekh on IT and 24/7 Wall Street.
Posted by Rich Miller February 24, 2007 | Permalink | Newsletter
February 08, 2007
EMC To Sell Some VMware Shares in IPO
EMC Corporation (EMC) will sell approximately 10% of VMware through an IPO of newly issued VMware stock. EMC will hang onto the remaining 90% of VMware shares, and "has no intention of spinning out or otherwise divesting this ownership interest."
VMware is the global leader in software for virtualization, the hot trend in managing complex data center infrastructures. The IPO will allow EMC to benefit from the boom in virtualization, but still retain tight control of VMware. The company also intends to use VMware stock options as as hook to attract technical talent.
"VMware is one of the fastest-growing businesses in the history of the software industry," said Joe Tucci, EMC Chairman, President and Chief Executive Officer. "We expect the IPO to unlock more of VMware's value for EMC shareholders while also strengthening its ability to retain and attract the software industry's top talent."
Posted by Rich Miller February 08, 2007 | Permalink | Newsletter
January 21, 2007
Virtualization Helping Save Tax Dollars
An agency within the U.S Department of Defense has virtualized nearly its entire server infrastructure, consolidating 17 data centers down to three, and reducing the number of servers from 560 to just 160. The Defense Contract Management Agency (DCMA), which manages contracts for the U.S. Department of Defense (DoD), used VMware virtualization software to improve its server utilization and data center management.
"DCMA has a duty to spend taxpayer money wisely while keeping the infrastructure running on a daily basis, and VMware Infrastructure allows us to do that," said Mike Williams, the CIO of the DCMA. "Virtualization is a key component of our data center strategy and a cost-efficient way for us to accommodate agency growth without requiring additional data center space."
Posted by Rich Miller January 21, 2007 | Permalink | Newsletter
December 13, 2006
Power: Key Selling point for VMware
VMware president Diane Greene says the company is planning to expand the rebate program that was recently rolled out by California utility PG&E, which offers financial incentives of up to $4 million per site for companies that use virtualization in data center consolidations. "Several other power companies are looking to do the same," Greene told ZDNet's Larry Dignan. An excerpt:
Greene indicated that power is becoming one of VMware's larger selling points. She says that VMware's lab is testing ways to move load and consolidate server workloads so they can shut down at night. These servers would then automatically start up again when needed. Under this scenario, you may use 100 servers during business hours and consolidate them down to 50 at night when you need less computing power.Sounds like a twist on Hewlett-Packard's dynamic cooling and lights-out data center management. The market for tools offering granular management of data center power and cooling is getting more interesting every day.
Posted by Rich Miller December 13, 2006 | Permalink | Newsletter
November 15, 2006
PG&E Offers Rebates for Virtualization
Pacific Gas and Electric has announced financial incentives to encourage the use of virtualization in data center consolidations, with qualifying customers able to earn a rebate of up to $4 million per project site. The initiative, which PG&E says is the first of its kind, has industry support from VMware, Intel, Hewlett-Packard, Dell, IBM and Rackable Systems.
The incentives are based on the amount of energy savings achieved through data center consolidation, and PG&E customers in northern and central California must apply for the rebate prior to pursuing a virtualization project (see PG&E's web site for additional details). In addition to the rebate, customers can expect to save $300 to $600 in annual energy costs for each server that is removed, the utility said. Those savings can almost double when reduced data center cooling costs are also taken into account.
"Virtualization technology is helping our customers realize significant energy and cost savings, while addressing critical data center capacity issues," said Helen Burt, senior vice president and chief customer officer for PG&E. "By providing financial support, we hope to increase industry adoption of this technology."
Posted by Rich Miller November 15, 2006 | Permalink | Newsletter
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