SAN FRANCISCO - The capital-management arm of Intel ( INTC) will begin selling nearly half its stake in VMware ( VMW) on Tuesday.

Intel Capital, which owned 9.5 million VMware shares, intends to sell 3.75 million shares on the open market beginning Tuesday, according to a Securities and Exchange Commission filing.

At the same time, Intel disclosed it had sold another portion of the stake to both Cisco ( CSCO) and EMC ( EMC) last week.

Taken together, the sales comprise half of Intel's stake in VMware. Intel bought the shares for $218.5 million, or $23 a share, in July 2007.

"I don't think there's any strategic aspect" to the decision, said American Technology Research analyst Doug Freedman. The portfolio's managers "possibly want to offset some profits and losses."

On Oct. 30, Cisco bought 500,000 VMware shares, or 5% of Intel's stake, at $26.52 a share, for a total of $13.26 million. At the same time, Intel sold an identical block back to EMC for the same price. Just prior to VMware's partial spinoff from EMC in August 2007, both Cisco and Intel acquired holdings in the software company, entitling each company to appoint a director to VMW's board.

When the virtualization developer went public in 2007, EMC retained 89% of the company it bought in 2004 for $625 million. EMC is unlikely to sell the remainder of its stake in 2009, when tax provisions expire.

VMware quickly became a darling of tech traders last year, shooting to $125 within three months of its initial public offering. Since then, the stock has fallen to $31.81, as investors fretted about impending competition for virtualization software makers, namely from Microsoft ( MSFT).

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