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"The sun always shines above the clouds."

-Paul F. Davis

EMC to Acquire Virtustream

martinwolf Transaction Analysis:

Financial Information

  • Transaction Size: $1.2 billion
  • Enterprise Value:$1.2 billion

Transaction Facts

  • Infrastructure services and solutions provider EMC Corporation (NYSE:EMC) announced yesterday that it agreed to acquire privately held cloud software vendor Virtustream for $1.2 billion.
  • EMC is a federation of companies including software virtualization pioneer VMware (NYSE:VMW). Activist investor Elliot Management Corp. and many others have pressured EMC to sell its stake in VMware, but the company has instead advocated a buildup of capabilities through M&A and internal growth.
  • EMC shares closed down 2 percent following the transaction announcement, but today have slightly increased.

Bracing for Cloudy Forecast

  • Filling a Capability Gap: EMC has been helping corporate clients move applications to the cloud through VMware, but some analysts identified a gap regarding large companies’ critical applications. Virtustream, whose customers include Coca-Cola Co. and Lexmark International, has the experience and capacity to fill this need.
  • Strengthening the Hybrid Cloud: Virtustream’s offerings follow a ‘hybrid-cloud’ model, in which companies use a combination of external cloud services and their own equipment. Following the acquisition, it will become EMC’s managed cloud services division and work closely with the federation’s extensive partner network.
  • Doubling Down on An Intact Strategy: This acquisition is a sign that EMC leadership is not planning on adopting Elliott Management Corp.’s breakup strategy, and is instead looking to build and strengthen its portfolio with proven success stories. While EMC’s first-quarter earnings and subsequent forecast did not meet analyst estimates, it expects this deal to add revenue and per-share earnings in 2016.

For more information on this transaction, click here.

 
martinwolf was not the advisor in this transaction.
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