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Why is EMC offering shares of its VMware subsidiary to the public market? Some theories:

• Maximize on VMware's current market value. EMC is trying to benefit from VMware's maximum value, before the market becomes more competitive with future offerings from Xen (via XenSource) and Microsoft. The commoditization of hypervisors may lower VMware's future valuation over the long-term, however, competition has been slow.
• Grow the business. VMware is most interested in hiring and retaining VMware executives with stock and options, or acquiring a company with additional products and revenues.
• VMware is getting too big. When EMC bought VMware three years ago, its revenues were less than $100 million. 2006 revenues rose to $709 million, which represents 6% of EMC's total revenue of $11.1 billion. Given its relative size and growth, VMware may be demanding access to resources that aren't available as a "hidden" entity within EMC. VMware's value is being held back by EMC and is an unrealized asset for shareholders.
• Virtualization has matured into a market of its own. Virtualization has grown dramatically over the past 5 years and is leading the data center into the next generation virtual data center. Virtualization now occurs at multiple levels: OS level (VMware, Xen, SWsoft, Microsoft); chip level (AMD, Intel); and infrastructure/platform level (Egenera and others). Having virtualization software as part of a storage product portfolio may not make complete sense going forward.

What would an IPO mean for the industry? It clearly signifies that virtualization is mainstream. Although hypervisor technology is commoditizing, the next battlefield will be managing the virtual data center and the infrastructure for automation, provisioning and management. All signs lead to this conclusion...that is what VMware is trying to do with VI3, HP with Virtual Connect (although I see nothing truly new here), Cisco with Topspin, and of course, Egenera with PAN Manager. The public market's investment in VMware will also spawn additional growth into the virtualization industry either through VMware or other players. The bottom line is that the data center is changing dramatically, and the next generation data center will be virtual. The question that users need to answer is when they're going to jump on board.