VMware IPO Has Some Investors Drooling

With the tech IPO market flooded again with companies of dubious near-term profit prospects, VMware's juicy public offering showcases an appealing trajectory.

"Their revenue growth is outstanding -- near vertical," says Ben Holmes of the research firm MorningNotes. What's more, Holmes says, VMware is well funded, with more than $250 million in cash on hand.

The Palo Alto, Calif.-based company, which is expected to go public this quarter under the ticker VMW, will remain under the control of parent EMC(EMC Quote).

VMware had revenue of $258.7 million in the quarter ended in March, compared with $129.1 million a year earlier. Earnings per share nearly doubled to 11 cents, year over year.

Full-year 2006 revenue was $703.9 million, up 82% from the prior year.

"There's been pent-up demand for this IPO," says Paul Bard, analyst with Renaissance Capital. "Investors have been waiting for this deal."

"Many investors view this as the most attractive piece of EMC's business right now," he says. VMware is viewed as "the golden child."

"If you look at the numbers on this company ... it is substantial in size, has a leading market position, is growing incredibly fast and is highly profitable," Bard says.

Yet, VMware is hardly a household name. The company's "virtualization" software enables IT departments to balance multiple applications, regardless of their operating system requirements, across servers, reducing overall system costs. Its innovation replaces the usual one-application-per-server approach.