Intel buys into VMware

Intel announced plans to buy a chunk of VMware stock and add an executive to the virtualization company's board.

Intel Corp. announced today it has agreed to become an investor in virtualization software provider VMware, Inc. via its global investment arm, Intel Capital.

Intel has partnered with VMware before to promote virtualization. In 2005, Intel added hardware support for VMware software in its chip line, and Intel chips comprise the majority of the systems on which VMware's virtualization products are deployed, the companies report.

Intel's investment is intended to solidify inter-company collaboration towards accelerating VMware virtualization product adoption on Intel architecture and reinforcing the value of virtualization technology for customers.

As part of the agreement, VMware and Intel will continue partnering in joint development, marketing and industry initiatives.

AMD customers, worry not
Illuminata Analyst Gordon Haff said customers who are loyal to Advanced Micro Devices (AMD) should not worry about Intel owning a portion of VMware stock.

"The bottom line is that I don't see this having any affect whatsoever on customers," Haff said. "VMware has shown themselves to be very independent of any financial backers when it comes to deciding which customer gear to provide support for. For example, EMC owns far more of VMware than Intel will after this transaction completes, yet VMware supports all manner of non-EMC storage arrays."

Intel Capital will invest $218.5 million in VMware's Class A common stock subject to review. At the completion of VMware's planned initial public offering and closing of the investment, Intel will own approximately 2.5% of VMware's total outstanding common stock (less than 1% of the combined voting power of VMware's outstanding common stock).

An Intel executive is expected to be appointed to the VMware board of directors.

Intel has also invested in SWsoft, the second largest virtualization player behind VMware.

"As a virtualization company, having Intel's support is invaluable. The monetary investment we received from them in 2005 was great, but of the active working relationship we've shared is of higher value," said Serguei Beloussov, CEO of SWsoft. "or us, working with Intel means we are able to make our products more effective, and bring them to market quicker."

Intel and SWsoft also have a Technology Collaboration agreement as part of this to work together on SWsoft Virtuozzo and SWsoft Parallels virtualization products.

Let us know what you think about the story; email: Bridget Botelho, News Writer.

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