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VMware In Two-Week Road Show To Prep For IPO

Virtualization software vendor's IPO price is expected to be between $23 and $25.

A source close to the server virtualization software giant confirmed that the road show has started, and is expected to last two weeks, after which the long-anticipated VMware IPO will probably happen.

The road show is the time when a pre-IPO company's executives present the company to analysts, fund managers, and perspective investors in order to generate interest in investing in the company.

VMware's IPO price is expected to be between $23 and $25, according to its S-1 filing with the Securities and Exchange Commission about a month ago.

Storage giant EMC said in February that it will sell a 10-percent stake in VMware through an IPO in a move to help VMware employees realize more value from the company independently of what they receive as part of the overall EMC organization.

EMC acquired VMware in December of 2003 for $635 million.

Interest in the IPO has intensified recently thanks to two strategic investments in the company in July.

Last week, Cisco invested $150 million for approximately 1.6 percent of VMware's total outstanding common stock, which is less than one percent of the combined voting power of VMware's outstanding common stock.

The move came after Intel said on July 9 that it invested $218.5 million in VMware.

The upcoming IPO is generating a lot interest from investors looking to take advantage of the fast-growing VMware.

It is also generating interest from solution providers who hope the IPO doesn't affect VMware's operations or personnel.

Hope Hayes, president of Alliance Technology Group, a Hanover, Md.-based solution provider and VMware partner, said the main concern she has is the likelihood that a VMware employee who gets stock options might leave.

"It's a funny thing with money," Hayes said. "I remember all the people job-hopping with IPOs a few years ago. This is the first time in a long time that an established, profitable company is going IPO. VMware is the first interesting company to do this in a while. I hope nobody we work with leave."

Going public also brings new pressures on a company, Hayes said. "It will be interesting to see how the company changes now that it has pressures from quarterly reports to deal with," she said.

Rolf Strasheim, vice president of sales at UpTime, an Edmond, Okla.-based solution provider and partner with VMware and with EMC arch-rival Network Appliance, said he expects no negligible impact, given that EMC is only offering 10 percent of VMware to the IPO.

However, Strasheim said he appreciates the effort that EMC is doing in the upcoming IPO. "EMC is showing VMware is an autonomous part of their business," he said. "As a NetApp reseller, we really appreciate it."

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