EMC eyes VMware in third consecutive acquisition

It’s three for three for storage networking giant EMC Corp. The company announced late Monday that it plans to buy virtualization vendor VMware Inc. in a deal worth an estimated US$635 million.

The VMware purchase falls on the heels of EMC’s recent acquisitions of content management solution maker Documentum Inc., and fellow storage vendor Legato Systems Inc.

In a conference call held Monday evening, EMC President and CEO Joe Tucci told listeners that the company intends to “virtualize” information structure — servers and storage — as another step in its open software strategy.

VMware focuses on enabling various operating systems to run simultaneously and independently on the same Intel-based server or workstation and dynamically move live applications across systems, the company said. The software creates a single pool of available storage and computing resources to make management easier for IT administrators.

According to Tucci, the acquisition of VMware will allow EMC to help customers lower costs within their heterogeneous environments.

“We are extremely pleased that VMware has chosen to join EMC,” Tucci said. “EMC has been focusing our major efforts on automated networked storage. We have been successful in helping customers drive their utilization rates from 20 to 30 per cent up to the 60 to 80 per cent range over the past several years, while significantly simplifying the management of our customers enterprise-wide information assets.”

Tucci continued that EMC has recognized that its customers have the same requirements around its open servers. He said users have been asking for a way to link the two environments together.

“We have been working in stealth mode on an internal project to accomplish this goal,” Tucci said. “We chose to team with VMware because our development team concluded that they had the best server virtualization software. VMware will increase server utilization and flexibility by dramatically cutting costs and simplifying management.”

According to Diane Greene, CEO of Palo Alto, Calif.-based VMware, the company has selected EMC as the best strategic choice in order to accelerate its own enterprise presence.

“We see EMC at nearly every enterprise customer we have,” Greene said. “We wanted to find a home with a company that had technology that could be combined with our own to provide yet another leap forward in our virtualization area.”

The acquisition is expected to be completed early in the first quarter of 2004. Additionally, VMware will continue its existing partnerships with leading server and storage vendors as well as ISVs and systems management providers. EMC will take over between US$15 million and US$20 million in the first quarter of 2004 after the deal is completed to cover VMware’s in-process research and development costs and other integration expenses. VMware will operate as an EMC subsidiary once the deal is completed, and will continue to be headed up by Greene.

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