Intel buys $218m stake in VMware

VMware is the largest provider of server virtualisation technology

Intel has agreed to acquire a $218.5m stake in VMware, a virtualisation provider owned by EMC. 

VMware is the largest provider of server virtualisation technology, and has demonstrated rapid sales growth over recent years. The company increased revenues by 82 per cent to $703.9m last year and posted a net profit of $85.9m.

The vendor is a long-time partner of Intel, which expects that the transaction will strengthen joint marketing and sales programmes designed to accelerate the adoption of virtualisation technology.

Virtualisation allows a single physical server to act as multiple separate units, and is considered a major enterprise IT trend. Intel and AMD have added virtualisation acceleration technology to their processors. 

VMware unveiled plans in February for a $949m initial public offer (IPO) in which parent company EMC will sell off a 10 per cent stake but retain 98 to 99 per cent of the combined voting power.

On completion of the IPO, the Intel investment will represent a 2.5 per cent stake in VMware. The chipmaker will hold less than one per cent of the voting power and get to appoint one board member.

The companies are also committed to expanding their partnership around joint development, marketing and industry initiatives.

Intel is a major backer of Xen, an open source virtualisation technology that ships as part of the Red Hat and Novell SuSE Linux distributions. Xen is considered less mature than VMware, however, and has struggled to gain significant market share.