The initial public offering of virtualization company VMware shocked and delighted Wall Street on Tuesday, with shares trading as high as $54 midday. At that price, VMware -- the dominant player in server virtualization -- has a $19 billion market capitalization. The company was acquired by storage giant EMC in 2003 for $625 million.
"Clearly, this is an endorsement of virtualization," said Brenon Daly, a financial analyst with The 451 Group in San Francisco. "We were absolutely blown away by how strong it came out."
Portfolio managers -- the major buyers of the stock today -- "understand the value virtualization offers, being able to wring more productivity out of existing technology," Daly said. VMware sales have grown from "nothing in 2003" to $750 million last year to $1.2 billion this year. "It's growing faster than any major software company."
Virtualization is creating sparks in data centers and CIO offices, and VMware currently has the market to itself. "Keep in mind the value proposition," Daly said. "When VMware comes in, they say, 'You've already sunk that money into data centers. Now for a marginal dollar you can get four times, five times, eight times, 10 times in performance.'"
With CIOs under pressure to do more with less, virtualization is "a very compelling pitch," Daly said. "You're not talking about a huge capital-intensive server rack. You've already spent that money. Why not get more bang out of what you already spent?"
Will Microsoft Catch Up?
Where is VMware's major competitor -- Microsoft -- in all this? "Microsoft has been slow to develop its own virtual machine technology," Daly said. In fact, it seriously considered buying VMware itself in 2003. Since Microsoft passed on VMware, it has been in a catch-up position, Daly said.
As Microsoft has shown time and again, however, it doesn't have to be first in. VMware's Explosive IPO Shows Power of Virtualization
A rotating binary star system, WR 104, 8,000 light-years from Earth, thought to be the final stage of stellar evolution to precede a cataclysmic supernova explosion, could emit a gamma ray burst toward Earth, astronomers at the University of Sydney have found.A 2005 study showed that a gamma-ray burst originating within 6,500 light-years of Earth could be enough to strip away the ozone layer and cause a mass extinction. (Source: http://www.cosmosmagazine.com/node/1878) Binary 'deathstar' has Earth in its sights
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