Virtualization software giant VMware Inc. is getting into the mobile device management business with a tentative deal to acquire Atlanta-based MDM leader AirWtach LLC. for US$1.175 billion in cash, plus approximately $365 million in installment payments and assumed unvested equity.
“With this acquisition, VMware will add a foundational element to our end-user computing portfolio that will enable our customers to turbo-charge their mobile workforce without compromising security,” said Pat Gelsinger, chief executive officer of VMware (NYSE: VMW) in a statement today.
The acquisition has been approved by boards of directors of both companies and is expected to close during the latter part of the first quarter of 2014.
Under the terms of the deal, the AirWatch team will continue to report to the company’s founder and CEO, John Marshall, as part of VMware’s end-user computing group which is led by Sanjay Poonen, executive vice-president of the software firm. AirWatch co-founder Alan Dabbiere will oversee a new AirWatch board which will report to Gelsinger.
About two years ago Gartner Research estimated the MDM market to be worth over $500 million with more than 100 players. As the bring your own device trend continues to spread in the enterprise space and the security and management of mobile device becomes a critical issue for organizations, MDM is expected to grow into a $1 billion market
The move to snap up an MDM firm is critical for VMware, said Mike Battista, senior consulting analyst for Info-Tech Research Group in London, Ont.
“BOYD and mobility are kind of the big disruptors right now and I don’t think that’s going to stop anytime soon,” he said. “By having Airwatch, they are one of the leaders in EMM (enterprise mobile management) now … it certainly puts them in a good position.”
AirWatch is considered the top MDM vendor, followed by firms such as MobileIron and Citrix, which entered the space with the acquisition of Zenprise.
The VMware-AirWatch deal points to a growing trend in the MDM space, according to Christian Kane, analyst for enterprise mobility, infrastructure and operations at Forrester Research Inc.
“We have definitely seen a lot of vendor entry into the space in recent months,” he said. “There will be a lot more consolidations in the next few years.”
Acquiring AirWatch provides VMware with a key presence in the MDM space since the AirWatch is already a leader in the market, he said.
“AirWatch on the other hand, gets the string financial backing and bigger customer base of VMware which can allow it to develop new technology,” he said.
VMware is a leader in the virtualization and cloud structure solutions space. The company has more than 500,000 customers and 55,000 partners around the world. The company expects its fourth quarter revenues to reach $1.48 billion, up by 15 per cent from last year. VMware said AirWatch is expected to bring in an additional $75 million to its revenues in 2014.
With the retention of the AirWatch executives, VMware appears to favour continuity and keeping AirWatch customers as the company expands VMware’s mobile solutions portfolio.
“Our vision is to provide a secure virtual workforce that allows end users to work at the speed of life,” said Poonen. “The combination of AirWatch and VMware will enable user to deliver unprecedented value to our customers and partners across their desktop and mobile environments.”
AirWatch has more than 1,600 employees in nine offices around the world. More than 10,000 organizations in 150 countries use AirWatch’s Enterprise Mobility Management Platform which includes mobile device, email, application, content, laptop and browser management applications.
“By joining a proven innovator like VMware, we now have the opportunity to bring our leading-edge solutions to an even broader set of customers and partners to help them optimize for the mobile cloud world,” said Dabbiere.
Good Technology, another leading provider of secure and managed enterprise mobility and collaboration tools, believes the AirWatch acquisition is an indication of the growing importance of MDM.
“This serves as a validation of the market as a whole,” said Christy Wyatt, CEO of California-based Good Technology Corp. “It signals to the industry that bigger vendors are ready to take MDM seriously.”
Wyatt, whose company does not focus solely on MDM, said the size of the VMware purchase could signal to beginning of more standalone MDM providers being gobbled up by larger companies.
Many MDM companies have an annual revenue of around $50 million.
“I think it’s exciting to see a $1.54 billion valuation on company the size of AirWatch,” she said. “Past MDM acquisitions were in a lower range.”