Shares of software company VMware soared 75 per cent on their first day of trading on the New York Stock Exchange this week as investors rushed to build positions in the most hotly anticipated technology initial public offering (IPO) since Google in 2004.
VMware's shares rose well above their $29-a-share (€21.60) offer price, the high end of expectations, briefly trading as high as $55 a share before falling back to $50.75 by midday. The gains left the company on track to deliver the biggest opening-day gain for an IPO this year.
That honour had previously belonged to Fortress Investment Group, an asset manager, whose shares shot up 67 per cent on their first day in February.
Sales at VMware have been growing at breakneck pace amid strong demand for its software, which helps companies increase the efficiency of their computer systems by allowing multiple processes to run on a single computer server.
VMware's sales grew 95 per cent in the first quarter to $256 million, putting the company on track to top $1 billion in sales this year.
Underlining the fact that virtualisation is now the hottest topic in corporate IT, Citrix Systems later in the week announced the acquisition of another player in the space, XenSource, for $500 million in stock and shares.
The 80-person company's products are commercial releases of the open-source Xen virtualisation engine which XenSource's founders developed when studying at Cambridge University.
The acquisition moves Citrix into the server and desktop virtualisation markets, which Citrix expects to be nearly a $5 billion market within four years. Industry experts say that virtualisation will one day become as crucial to business computing as operating systems like Microsoft's Windows.
"Virtualisation has the capability to become the next operating system in the data centre," said David Skok, who is a general partner with investment firm Matrix Partners and also sits on the board of Virtual Iron Software, a tiny privately held rival of VMware.
EMC, the data storage equipment company that bought VMware in 2004 for $635 million, announced plans earlier this year to float a 10 per cent stake in the company to unlock value for shareholders.
VMware's stock price on Tuesday implied an overall market capitalisation of just over $19 billion, making it the world's number-five publicly traded software maker based on market value, behind Microsoft, Oracle, SAP and Adobe. It is also ahead of Ford Motor's market capitalisation of $17 billion.
"It is always difficult to know how the market is going to react, but this is certainly at the high end of our expectations," said David Goulden, EMC's chief financial officer.
VMware, which was founded in 1998, has said it plans to use its $957 million in IPO proceeds to fund a dividend to EMC and buy a new corporate headquarters.
Diane Green, VMware's co-founder and chief executive, said the company was looking forward to using its newly public shares as currency to make acquisitions and to reward its 3,000 or so employees for its strong performance. -
