Editor's Blog: VMWare's IPO

It was with a furrowed brow that I read some of the many hundreds of headlines over the last day or so about the floatation of virtualisation specialists VMWare.

True, the spin-off from EMC - which bought it in 2004 - saw its shares rise 76 per cent in a day. But apart from use of words such as "surge", "rockets", "blasts off" and "scorching", what got me was the well-known business daily that referred to the IPO as the "new Google".

Don't get me wrong, I was, like many others, impressed and happy that Google's 2004 IPO went well. While it may have looked like a sure thing, in many ways it marked the end of the dark, post-bubble days and signalled new optimism. I'm not sure about some of the gains in that stock since that time but that's another story.

But are we in danger of talking up tech markets too much at this time?

VMWare is a solid outfit. I was working on a video panel yesterday and the subject of virtualisation came up again and again. That word - virtualisation (our Cheat Sheet on the subject is here) - has several different meanings but VMWare's take on it is pretty significant. How significant? Put it this way, CIOs and even coal-face CTOs out there can get their non-IT peers and the boss excited about what it can do for streamlining and cutting cost from IT systems.

Storage giant EMC retains almost 90 per cent of VMWare (other industry stalwarts Cisco and Intel also recently acquired small, pre-IPO stakes) and the situation reminds me of one back at the time of the last tech bubble.

3Com spun off handheld-maker Palm, retaining a significant share, and the latter's stock market value rose so much for a while it meant 3Com's stake in Palm was worth more than the total market cap of 3Com - in other words, the rest of 3Com was worth a negative amount. The company had had its difficulties but this was clearly one of those classic anomalies. It made no sense.

And after yesterday's opening, on what was again another generally poor day for the world's financial markets, EMC's stake in VMWare is worth around two-fifths of EMC's own total value.

Some more big gains and EMC could be in the 3Com paradox of a few years back.

And I would call that madness - especially given EMC's strength in so many areas now - rather than start celebrating the 'next Google' or the 'next Netscape'.