August 27, 2018 / 4:37 PM / 22 days ago

VMware to acquire startup CloudHealth in push to grow cloud offerings

SAN FRANCISCO (Reuters) - VMware Inc will acquire CloudHealth Technologies as part of the information technology company’s continued push into cloud-based software services, the company announced on Monday.

FILE PHOTO: VMware CEO Pat Gelsinger speaks during a news conference in Tokyo July 15, 2014. REUTERS/Yuya Shino/File Photo

The Palo Alto, California, company will pay approximately $500 million for the Boston-based startup, sources familiar with the matter told Reuters.

VMware will purchase CloudHealth for the company’s cloud management platform, VMware Chief Executive Pat Gelsinger told Reuters. That platform makes it possible for enterprises to control and analyze the costs, compliance and performance of their computing environments across their own data centers and public clouds like Amazon Web Services and Microsoft Corp’s Azure.

“Anybody who is deploying apps operating in a cloud is utilizing multiple public clouds. How do I manage that complexity? CloudHealth is exactly aligned with that,” Gelsinger said. He declined to comment on the price of the deal.

The company announced its acquisition in Las Vegas at VMworld, the company’s annual industry conference, where it also announced a series of new cloud services, including an expansion of the VMware Cloud on AWS partnership with Amazon.com Inc.

VMware has been adding subscription-based software services over the past year as more corporations begin to shift their computing and data storage systems off of their own servers and into public clouds.

Key to this strategy has been the VMware Cloud on AWS partnership that makes it simple for enterprises to transition onto the cloud. With the addition of CloudHealth, VMware is making it easier for its customers to manage services on other cloud providers, such as Azure and Alphabet Inc’s Google Cloud Platform.

“We’re going to refresh the vision that we have for the cloud,” Gelsinger said.

Among infrastructure decision makers at enterprises, 91 percent said they use two or more vendor’s public cloud environments, with 19 percent of respondents saying they use between six and nine, according to an April report by Forrester Research.

Within the global cloud systems management software, VMware holds 21 percent of the market, followed by Microsoft Corp with 14 percent, according to 2016 figures provided by research firm IDC. That market is projected to be worth $5.4 billion this year and is forecast to reach $10.1 billion in 2021, according to IDC.

“Multi-cloud is a growing use case, and it’s something that enterprise IT shops are very interested in,” said Paul Delory, Gartner analyst. “It behooves everyone in this space to work with multiple cloud providers.”

VMware expects the acquisition to close this quarter, the company said. Its immediate plans for CloudHealth include the integration of two of VMware’s existing cloud services, analytics tool Wavefront and security tool CloudCoreo. More services will become integrated over time, and CloudHealth, which has hundreds of employees, will continue to operate in Boston, Gelsinger said.

Dell owns 81 percent of VMware and considered combining the two companies earlier this year. Dell ultimately proposed to pay $21.7 billion in cash and stock to buy back securities called tracking stock that correspond to its economic interest in VMware, partially funded through a $9 billion special dividend from VMware.

Some shareholders in the stock that tracks Dell’s stake in VMware may oppose the deal because they feel the proposal is too low and unfairly transfers value to Dell, sources have said, and a vote is expected in October.

Reporting by Salvador Rodriguez in San Francisco and Liana B. Baker in New York; Editing by Chris Reese

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