EMC to buy Virtustream for $1.2bn

EMC (NYSE:EMC) is to buy cloud management service provider Virtustream for $1.2bn. The storage giant said it would incorporate Virtustream into its newly-formed cloud managed services business.

Virtustream was launched in 2008 and specialises in SAP software automation and cloud on-boarding. Its customers include companies such as Coca-Cola, Domino Sugar, Heinz, Hess Corporation, Kawasaki, Lexmark and Scotts Miracle-Gro.

The firm will operate within the federation of EMC businesses including Pivotal and VMware. EMC says the purchase “represents a transformational element of EMC's strategy to help customers move all applications to cloud-based IT environments.”

“With the addition of Virtustream, EMC will enable customers to move their entire application portfolio into a cloud environment,” it adds.

“Virtustream is an exceptional company and this is a critical and transformative acquisition for EMC in one of the industry's fastest-growing and most important sectors," says EMC chairman and CEO Joe Tucci. "With Virtustream in place, EMC will be uniquely positioned as a single source four our customers' entire hybrid cloud infrastructure and services needs.”

EMC says it plans to offer Virtustream’s xStream cloud management software, which is already integrated with VMware vSphere, to its partners. The addition of Virtustream to the EMC portfolio looks to be another building block in the federation business and damps down any speculation that it is to be broken up, despite activist shareholder Elliott Management pressuring the company to do so.

“Virtustream has established itself as an industry leader and innovator for running mission-critical enterprise applications in the cloud,” says Rodney Rogers, Virtustream chairman and CEO.

“We’re proud to be joining the EMC Federation where our combined capabilities, products and services will allow us to accelerate our vision of delivering the platform of record for enterprise systems, and address the complete breadth of cloud computing needs,” Rogers adds.

Howard Elias, president and chief operating officer of Global Enterprise Services at EMC says in a blog post that the firm was increasingly hearing from customers that they want the option to confidently move all workloads to an off-premise managed cloud model, including their most mission-critical applications like SAP.

“The significance of Virtustream is that it will also extend the EMC Federation’s capabilities to enable us to support everything from the smallest applications to the most I/O intensive enterprise applications, whether on or off prem, as we intend to incorporate this technology into the Federation Enterprise Hybrid Cloud Solution,” he says.

Bill McDermott, CEO of SAP says that his company has a long-term partnership with Virtustream to host mission-critical applications in the cloud.

“SAP will continue to serve as a partner with the new EMC managed cloud services business and we remain ever committed to supporting the hybrid cloud landscapes of shared customers around the world,” he says.

The all-cash deal is expected to close in the third quarter of the financial year with Rogers reporting to Tucci. The acquisition has already been approved by both sets of directors.