The Missed VMWare Effect

Last year, Citrix agreed to buy virtualization software company XenSource for $500 million. It was a big exit, but would have been even bigger had the deal terms not been finalized before virtualization king VMWare priced the year’s richest tech IPO. One Xensource investor told me at the time that he tried not to think about such things, for fear of causing too many gray hairs. He was unconvincing.

Today we have the flipside. Virtual Iron Software Inc. announced that it has raised $20 million in new VC funding, from existing shareholders like Highland Capital Partners, Matrix Partners, Goldman Sachs, Intel Capital and SAP Ventures. no idea what the valuation was, but a good guess is that it would have been lower had this deal been signed after yesterday’s announcement that VMWare would miss Wall Street estimates.

The VMWare news could only be considered disappointing within the insular world of equity analysts, as the company still projected revenue growth of 50% (compared to the 70-80% estimates) – but it nonetheless sent the company’s stock down more than 30 percent. Maybe a few gray hairs at Virtual Iron have returned to their natural color…