Intel and VMware announced today that Intel Capital is taking a $218.5 million stake in virtualization company VMWare. Intel will purchase 9.5 million Class A shares at $23 per share, which, at the completion of VMware's forthcoming IPO, will give Intel about a 2.5 percent stake in the company. Because VMware's stock is split between Class A shares, which have less voting power, and Class B shares, Intel won't control that many votes in the company, but they will get a board seat. Related Stories * Viridian beta and Virtual Server 2005 R2 SP1 will miss target dates * Viridian drops some core features to ship on time. * VMware begins Fusion beta for Macs * SPEC starts on virtualization benchmark There are a few good reasons for Intel to get on board the VMware train right now, even if Microsoft is currently gearing up to wreck that train if it can. (More on the Microsoft angle in a moment, though.) First, VMware is currently the market leader in virtualization, especially when it comes to all-important enterprise-level management functionality. Second, VMware is gearing up for what will probably be a successful IPO, given their prominent position in this hot space and given current market conditions. So it's a good bet that Intel will make money off of the VMware IPO. Third, Intel has much to gain by seeing any x86 virtualization vendor succeed, because the chipmaker will sell most of the hardware to make the virtualization market go regardless of who wins on the software side. So an investment in VMware is an investment in growing a vital market for Intel. All of these reasons, along with the aforementioned board seat, were probably factors in Intel's decision to invest in VMware. The question that remains is this: what happens when Microsoft not only matches VMware's management functionality but integrates their entire virtualization solution seamlessly into Windows? A shift in the market A while back, I got about 3,000 words into a long tech feature on virtualization before realizing that a) it's nearly impossible to come up with a taxonomy of virtualization solutions that is fine-grained enough to be meaningful, yet abstract enough to be useful (this is because x86 virtualization is in a class by itself, and even if I just stuck to x86 I'd wind up writing a series of "how it works" pieces on specific vendors' packages), and b) actual low-level implementation differences don't matter nearly as much today as they did before VT-x went mainstream with the Core 2 Duo. Right now, the virtualization market is just starting to mature out of the phase where different vendors pit their core virtualization technologies against each other. How to build a good x86 hypervisor, especially in the wake of Intel's VT extensions, is pretty much a solved problem, so the days when virtualization vendors would argue over the relative performance advantages of this or that low-level implementation are nearly over. Good x86 hypervisors are no longer a novelty item, thanks mainly to VMware, which initially showed everyone that it could be done well. Today's virtualization scene is about enterprise-level management tools, and in this arena VMware is the reigning champ. But Microsoft has made it clear that they intend to compete with VMware in the virtualization space, and that they also intend to build the relevant management functionality into Windows. Microsoft will eventually rework their entire Windows product line, from consumer editions up to server editions, to include virtualization (and the management of virtualized resources) as a core operating system capability. When this happens, it's very likely that the only Windows-based virtualization solution that any Microsoft shop will consider is the default one that ships with Windows. At this point, VMware had better hope that XenSource hasn't caught up with them on Linux, because Linux will be the only place where VMware will have a prayer. So how long after Vmware IPO before Intel acquires the company?