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VMware Shares Soar after IPO Prices at $29 a Share

Software maker VMwaresoared 79 percent in the software maker's trading debut early Tuesday, a start following an initial public offering that initially lived up to hopes it could be one of Wall Street's hottest IPOs of the year.

VMware, which makes software that businesses use to boost efficiency of data centers, debuted at $52 on the New York Stock Exchange, up from Monday's IPO price of $29.

EMC, its parent and the world's biggest maker of corporate data storage gear, sold 33 million class A shares to the public. That accounts for about 9 percent of the 375 million shares of common stock in VMware.

It was recently quoted at $49.90, giving it an implied stock value of $19 billion to a company that until recently has been relatively unknown in the investment community and now counts itself among the world's top 10 software makers by market capitalization.

At Tuesday's price it was trading for more than established industry players including the top two security software makers, Symantec and McAfee and Intuit, which sells TurboTax and Quicken.

VMware's market capitalization was higher than established market players. It remains behind only a handful of powerhouses including Microsoft, Oracle, SAP and Adobe Systems.

Underwriters have an option to buy an additional 4.95 million shares.

So far this year the top-performing U.S.-listed IPO has been Fortress Investment Group, which climbed 67.6 percent on its Feb. 8 trading debut.
Unlike recent hot technology IPOs such as that of Google , whose products are used by millions of consumers on a daily basis, virtualization is a relatively arcane subject.

But some investors have gotten a crash course on the subject in recent weeks.

Analysts have been talking up the IPO, saying that companies can justify investing in virtualization technology even in times of tight cost controls because it helps save money by reducing the number of computers they needed to run their businesses.

For the past several quarters VMware's sales have doubled from the year-earlier periods as its software has become more widely adopted in corporate data centers, boosting the company's annual revenue to about $1 billion.

Jefferies & Co analyst Katherine Egbert said she expects the stock to post a healthy gain in its trading debut.

"It's a steal up to $35," she said. "It's fully valued somewhere in the mid-$40s."

EMC , the world's biggest maker of corporate data storage gear, sold 33 million class A shares, or about 9 percent of the 375 million shares of common stock in VMware. It also gave underwriters an option to purchase an additional 4.95 million shares.

The spinoff of VMware at nearly $11 billion gave EMC a windfall profit on the Silicon Valley software maker which it bought in January 2004 for $625 million in an effort to diversify beyond hardware.

VMware is trading on the New York Stock Exchange under the symbol "VMW". The IPO was Led by Citi, JPMorgan and Lehman Brothers.

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