Intel To Buy $218.5M Stake in VMware

Intel Corp., the world's largest chip maker, will invest $218.5 million in virtualization software maker VMware Inc., the companies announced Monday.

The investment will give Intel ownership of about 2.5 percent of VMware's outstanding shares after VMware completes its initial public offering. An Intel executive also will join VMware's board of directors.

The deal underscores the growing importance of so-called virtualization software, which allows companies to run more than one operating system on individual computers, in turn boosting the productivity of those machines and cutting overhead costs.

Intel and VMware said they will continue to jointly develop and market products, and that the investment is designed to increase the adoption of VMware's software on computers running Intel's chips.

Intel, whose chips function as the core calculating engines of personal computers and servers, will benefit because it can make its chips work better with VMware's virtualization software.

Separately, VMware said Monday that it expects to raise about $741.4 million, after expenses, from its IPO. The Palo Alto-based subsidiary of data storage provider EMC Corp. expects to sell 33 million Class A shares for between $23 and $25 per share.

The anticipated net proceeds assume an offering price of $24 per share. VMware plans to list its shares on the New York Stock Exchange under the symbol "VMW."

EMC will continue to control VMware after the offering. Intel's investment comes from its investment arm, Intel Capital.