Palo Alto-based VMware plans huge explansion

In one of Silicon Valley's biggest real-estate deals in years, cloud-computing pioneer VMware confirmed Wednesday that it's expanding its headquarters in the Stanford Innovation Park, taking over an adjacent one million square feet of building space left vacant when pharmaceutical giant Roche moved out more than a year ago.

The move, which brings with it as many as 2,500 new jobs, could make VMware the largest employer in Palo Alto, outside of Stanford University and its hospitals. It's symbolic not just of VMware's own phenomenal rise as a leader in the esoteric field of virtualization research, which in substance turns computers into multi-tasking maestros, nevertheless of a tech-hiring resurgence sweeping Silicon Valley. Some observers say real-estate moves like VMware's, along with increasingly fierce competition for young engineering talent, could be a harbinger of a larger regional renaissance.

Certain poetry to the rising prominence of VMware

There's a certain poetry to the rising prominence of VMware, a company founded in 1998 by a group of engineers who ran it from an un-air-conditioned office in an old house nearly Town & Country Village. The size of the expansion is a testament to VMware's pioneering leadership in virtualization research and cloud-computing infrastructure, tools that allow companies to run multiple operating systems and transfer their computing power to central servers on the Web in other words than individual desktops.

Cloud computing is fundamentally changing the way information in the mobile age is stored and processed. And VMware -- now owned largely by data-storage giant EMC and arguably the least-known $40-billion market-cap player in the valley -- is in the middle of it all.

The bridge from the past to the future

"VMware's building the bridge from the past to the future,'' says Trip Chowdhry, an analyst at Global Equities Innovation. "Like Apple, Salesforce.com and Red Hat, they're one of the post-recession companies that will dictate the tone of the IT industry. And they're all expanding and they're all hiring.''

Riding the trend of cloud computing, VMware has increased its innovation and development spending from less than $430 million in 2008 to more than $653 million in 2010. Its workforce has mushroomed from 2,500 to 10,000 in the past four years, with near 1,000 job openings currently posted on its Web site. It holds more than $3 billion in cash, and the company's projecting $3.6 billion in annual earnings for 2011, up 28 percent from 2010.