EMC's VMWare IPO: New Preliminary Data
The upcoming and expected IPO out of EMC
Corp. (EMC-NYSE) for the VMWare unit this
summer is still on track, and there are few IPO's this summer that are going to be as sought after as VMWare. Yesterday I spoke with EMC and got a bit more data that was able to clarify some timing issues. There was an amended filing back on June 11 with more data for
the SEC and there are now more
underwriters than in the original S-1 filing: lead underwriters are
Citigroup, JP Morgan, and Lehman; co-managers are now listed as Credit
Suisse, Merrill Lynch, and Deutsche Bank; other managers carried on the
amended filing are Banc of America, Bear Stearns, UBS, Wachovia, A.G.
Edwards, and HSBC. We have been waiting for this IPO since February when the IPO was first filed.
For starters the company cannot say or predict when their IPO of the VMWare unit will come. But some inferences can be made regarding this. The amended filing is not a big deal but they are still waiting to hear back from the SEC for all conditions to be met on employee stock options (implied at at $23) and other issues. EMC posts earnings on the morning of July 24, 2007, and it is probably a safe bet that you won't see the IPO before then. The company still wants the IPO in the summer rather than later. If I was a making odds on timing, I would start the odds in the second week of August. That of course is subject to the whim of the stock market and subject to SEC filings and amendments, and that could easily change. Its VMworld 2007 conference is September 11-13 in San Francisco, and it would seem quite obvious that the company wants this IPO wrapped up by then.
VMware's virtualization technology allows for multiple operating systems to run side-by-side on a single machine. This helps customers save on and use hardware more efficiently without the need for more than one PC. VMware posted net income of $87 million on revenue of $704 million in 2006 (up 82% from $387.1 million in 2005). Q1 2007 revenues were $258.695 million versus $129.077 million in Q1 2006, and services were a larger percentage of total revenues compared to license revenues. The company claims 20,000+ customers and has 100% of Fortune 100 companies and 84% of the Fortune 1000 companies. Partnerships are listed as the following: 200+ leading hardware, software, network and storage companies; 4000+ resellers, distributors, and systems integrators. We had also noted back at the end of February how VMWare was successfully taking on Microsoft (MSFT-NASDAQ) as a competitor.
For starters the company cannot say or predict when their IPO of the VMWare unit will come. But some inferences can be made regarding this. The amended filing is not a big deal but they are still waiting to hear back from the SEC for all conditions to be met on employee stock options (implied at at $23) and other issues. EMC posts earnings on the morning of July 24, 2007, and it is probably a safe bet that you won't see the IPO before then. The company still wants the IPO in the summer rather than later. If I was a making odds on timing, I would start the odds in the second week of August. That of course is subject to the whim of the stock market and subject to SEC filings and amendments, and that could easily change. Its VMworld 2007 conference is September 11-13 in San Francisco, and it would seem quite obvious that the company wants this IPO wrapped up by then.
VMware's virtualization technology allows for multiple operating systems to run side-by-side on a single machine. This helps customers save on and use hardware more efficiently without the need for more than one PC. VMware posted net income of $87 million on revenue of $704 million in 2006 (up 82% from $387.1 million in 2005). Q1 2007 revenues were $258.695 million versus $129.077 million in Q1 2006, and services were a larger percentage of total revenues compared to license revenues. The company claims 20,000+ customers and has 100% of Fortune 100 companies and 84% of the Fortune 1000 companies. Partnerships are listed as the following: 200+ leading hardware, software, network and storage companies; 4000+ resellers, distributors, and systems integrators. We had also noted back at the end of February how VMWare was successfully taking on Microsoft (MSFT-NASDAQ) as a competitor.
VMWare was acquired when it was private in 2003 and the deal closed in early 2004 for close to $625 million, and this upcoming IPO has been one of the issues that helped EMC's stock climb from under $13.00 in March to north of $17.50; in May we noted a roadblock at EMC's multi-year highs. Roughly 10% of the company is what is expected to come to market in an IPO, but EMC shareholders will not receive shares in a spin-off as this is an IPO and similar to the old 'tracking stock' IPO.
We'll be sending out expectations on EMC and VMWare to subscribers of the 24/7 Wall St. Special Situation Investing Newsletter (Trial sign-up) and some historical data comparing this to other such scenarios regarding other IPO's that are of hot units out of key technology companies.
Jon C. Ogg
June 27, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
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