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EMC Acquisition of VirtuStream Closes the Door to a VMWare Spin-Off

spinoff

Two days ago, storage giant EMC announced that it has reached an agreement to acquire VirtuStream for $1.2B. VirtuStream is not the most well-known platform in the cloud market but one that has developed a considerable penetration in the enterprise space. This move follows the recent acquisition of CloudScalingrepresenting another step in EMC’s strategy to develop a robust cloud portfolio.

While the acquisition brings very clear benefits to the EMC cloud stack from the capabilities standpoint, it has raised some interesting questions about the future of EMC’s crown jewel: VMWare. In recent months, EMC has been under pressure from activist investor Elliott Management to spin off VMWare as a separate company. The hedge fund manager has been critical about EMC’s federation structure under which companies like RSA, Pivotal and VMWare are run as independent companies. The debate about a potential VMWare spinoff has continue throughout 2015 in part fueled by the VMWare’s relatively poor market performance. The acquisition of VirtuStream seems to be a clear signal against those plans.

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From a technical perspective, VirtuStream allows companies to transition applications to the cloud in a secure and compliant way. The xStream cloud management platform offers a consistent management   across public, private and hybrid cloud topologies. Those capabilities clearly align with the VMWare’s technologies like vCloud Air that provide a robust option for hybrid cloud enterprise topologies. From that perspective, the acquisition of VirtuStream only indicates EMC commitment to build a robust cloud portfolio in which VMWare is the central piece. In that sense, VirtuStream integration with vCloud Air will accelerate the path for customers migrating applications to a hybrid cloud topology powered by the VMWare stack. Regardless of how the integration between VirtuStream and vCloud Air materializes, its pretty obvious that EMC plans to keep both business running under its “federation”.

Despite the technical alignment and the fact that the price for the acquisition was relatively reasonable and the technology, investors clearly were not thrilled with the EMC decision. To prove the point: EMC shares were down 2.2% at $26.25 in mid-afternoon trading on Tuesday. EMC’s 52-week trading range is $25.07 to $30.92, and the market cap is $51 billion.

 
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Posted by on May 28, 2015 in Uncategorized

 

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VMWare is Back! And It Looks Like the Old VMWare

Three weeks, a new CEO and two acquisitions! VMWare seems to be fighting back with a level of energy we haven’t seen in quite some time. Yesterday during their quarterly earnings report, VMWare announced the acquisition of Nicira (beautifully pronounced “nice era” ) for an astonishing $1.26B. This follows on the heels of the acquisition of DynamicOps a few weeks ago. Between acquisitions and earnings report, VMWare announced that CEO Paul Maritz will be stepping down and being replaced with current’s COO Pat Gelsinger. Seems like a lot for a few weeks doesn’t it?

The acquisition of Nicira is nothing but a brilliant move on VMWare’s side. The startup that has been in stealth mode for about five years and has raised over $50M in venture capital, has tackled one of the most important problems in the virtualization and, consequently, cloud computing worlds: network virtualization. In the same way, VMWare pioneered the server virtualization models; Nicira has built a technology that virtualizes the physical networks. Without haven’t seen the technology in action, I can clearly imagine that this type of technology can add another dimension of elasticity to existing cloud infrastructures.

Despite the brilliance of the technology, its important to notice that VMWare is paying top dollars for a nascent technology and a remarkable team and not for a fully developed company with a clear go to market strategy. This bold move shows the risk taking mindset that has been missing from VMWare in recent years.

Without a doubt the most successful enterprise software company of the last few years, VMWare built an empire based on revolutionary’s technologies, innovation and constantly defying bigger companies like Microsoft. However, in the last two years, VMWare traded its “white knight” armor and developed a sort of tyrannic and hardly innovative reputation within their customers. Consequently, VMWare started taking repeatedly punches from the “now underdogs” of the virtualization space such as Microsoft, Citrix and even Oracle.

The acquisition of Nicira is a clear sign that VMWare is going back to its core DNA: out-innovate and out-execute everyone. With Nicira, VMWare has acquired a unique technology that, if executed correctly, can put them in a great position to dominate the $37B data networking market and provide a clear differentiator in their cloud computing offering.

From my personal standpoint, I am super excited to see a great technology win without having to get corrupted with the realities of building a business. More than anything, I am excited to see VMWare’s focus on innovation and creativity back!

 
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Posted by on July 24, 2012 in Uncategorized

 

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