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Intel Goes Virtual with VMware Stake

There’s nothing like buying your way into an industry to get a foot through the door.

Intel Capital just made a US$ 218.5 million buy-in on virtualization company VMware, pocketing 9.5 million Class A shares (that’s US$ 23 per share) in the process.

After VMware’s IPO, those dollars and cents grant Intel a tidy 2.5 stake - which ain’t much, granted, but it will be enough for a board seat.

Perhaps aware of its increasingly dull edge in the digital era, last November Intel made a splashy entrance into Web 2.0 with SuiteTwo, a software applications offering that included blogs by Movable Type, wikis by SocialText, and RSS by NewsGator and SimpleFeed. So Intel’s no stranger to leveraging relationships to boost its way onto the cool train.

But while it joined the Web 2.0 party late in the game, virtualization is just heating up. And for Intel, casting lots with VMware was a wise choice. Ars Technica outlines the reasons nicely:

1. VMware is the industry leader. And far from just a hacker darling, it has white-collar clout with its inclusion of sound enterprise-level management functionality
2. VMware has an IPO on the way, and given the receptivity of the market, it promises to be a success
3. Intel is already poised to sell most of the hardware necessary to keep the virtualization market afloat. VMware is, in essence, an investment in a market whose potential it can help enliven

It certainly helps that Microsoft — which could, Ars Technica points out, one day integrate its own virtualization solution into Windows — is fudging on this platform right now. Last May the Office giant pulled features out of its anticipated Viridian hypervisor, potentially driving the impatient, or disillusioned, straight into the arms of competitors like VMware.

For once, at least in our view, Intel’s taking advantage of a ripe opportunity to live by its slogan and “leap ahead.” We just hope it can tap to the tempo once Microsoft gets its footing back.