EMC to hold VMWare stake for 2 years

By Philipp Gollner and Jim Finkle

NEW YORK (Reuters) - Computer data storage company EMC Corp. (EMC.N: Quote, Profile, Research, Stock Buzz) does not plan to reduce its stake in its VMWare subsidiary for at least two years after an upcoming initial public offering, Chief Financial Officer David Goulden said on Wednesday.

Shares of EMC rose more than 2 percent following the news.

"We're obviously going to assess the situation down the road based on what's happening," Goulden said at the Reuters Global Technology, Media and Telecoms Summit in New York.

But he said the company aimed to keep its 90 percent stake after the IPO for some time. "I'm looking at least a couple of years time horizon," he said.

He added that VMWare was a "unique asset."

"If I could have my cake and eat it too, I'd like to take it public and not dilute it," he said.

EMC, which bought VMWare in 2004, announced plans in February to sell a 10 percent stake in an IPO. VMWare software lets large computers run several operating systems simultaneously, making it easier and cheaper to manage networks.

EMC's April filing with the U.S. Securities and Exchange Commission said the IPO would raise up to $100 million. VMWare's so-called virtualization software allows companies to boost the efficiency of data centers by tapping processing power that would otherwise go unused, allowing one computer to perform work typically done by multiple machines.

Goulden also said EMC was more likely to beat annual revenue and profit targets than meet them, given strong results in the first quarter. EMC said

Exceeding the company's forecast "is more likely, given the strong start," he said. EMC in January forecast 2007 revenue growth of 14 percent to at least $12.7 billion, and net income of at least 64 cents per share.

Goulden also said he expects industry-wide global information-technology spending this year to grow by 5 percent to 6 percent from 2006, about the same as last year's rate.

But he said technology spending in the United States would likely grow more slowly than last year as large U.S. corporations take a "wait-and-see approach to the economy." Sales to small- and medium-sized businesses and sales abroad should make up for the difference, however, he added.

"It's a little bit of caution now," Goulden said of U.S. technology buyers. "People are looking at the economy and looking at what they bought last year."

EMC shares rose 34 cents, or 2.2 percent, to close at $15.77 on the New York Stock Exchange. The stock was already up 17 percent this year based on Tuesday's closing price.