VMWare: Tomorrow's IPO

VMware Inc. is a wholly-owned subsidiary of the tech giant EMC Corporation and is the leading provider of virtualization solutions. The company supplies proprietary virtualization software for x86-compatible computers, including VMware Workstation and the freeware VMware Server and VMware Player products and has a overall bright prospect of making its mark in Tech world.

Tomorrow the Initial Public Offering of VMware Inc. will start trading in the floor of NY stock exchange with ticker symbol VMW and the company is hoping to raise $924 million. The company kept the size of the deal at 33 million shares and raised its estimated price range from the earlier level of $23 to $26.

For the 3 months ended on June 30, VMware reported preliminary 2nd-quarter net income of $34.2 million on revenue of $297 million, compared with net income of $15.2 million on revenue of $156 million in the year-ago period. Income surged on sales of its software that helps businesses boost the computing power of Web servers.

With high profile investments from Intel (estimated 1.6% stake) and Cisco (estimated 2.5% stake) under its belt, VMWare may turn out to be the hottest IPO of the summer of 2007. But individual investors must not emerge themselves in emotion that prevails on first few days of a predictably hot IPO and throw too much money in it tomorrow. Just like we saw recently in the case of Blackstone (BX), the initial euphoria may die down quickly leaving the individual investors in limbo at least for some time adding to their worry from the recent pullback in global stock market. Blackstone traded at as high as $38 on its debut date June 22 this year and last Monday it had its lowest point at $22.76 (today's closing price $25.71).

While long term prospect for both BX and VMW would remain to be good, such a pullback right after investment always throws the confidence of investors into disarray and thus badly affects their trading strategy leading them to take bad decisions on other stocks as well.