Intel Takes Minority Stake in VMware

Showing just how hot the virtualization market has become, Intel has taken a minority stake in VMware, now owned by enterprise storage company EMC. Intel is investing $218.5 million for 2.5 percent of all outstanding VMware common stock, and will gain control of one board seat. EMC paid $635 million for VMware in late 2003.

VMware, which is facing increased competition from Microsoft and newcomer Parallels, stands to gain a great deal from Intel's investment. The company will now have closer ties to the hardware its software virtualizes, although it must be careful not to cross any antitrust boundaries and US government approval will be required. For Intel, the deal is also a windfall: it is paying $23 per share, and VMware is preparing to go public for at least that much.