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It was a big afternoon for
VMware
company software company revealed definitive agreements to acquire both
Pivot software
and
Carbon black
,
as well as the publication of the financial results for the second quarter of its fiscal year.
The biggest surprise is the deal with Carbon Black (symbol: CBLK), a security software company focused on "protecting cloud endpoints". VMware (VMW) buys the company based in Waltham, Massachusetts, for $ 26 a share, for a $ 2.1 billion transaction price.
Carbon Black shares rose $ 1.75, or 7.7%, to $ 24.50 Thursday, before the announcement. The stock has been rising in recent weeks as a result of reports that both
Cisco Systems
(CSCO) and
International Business Machines
(IBM) explored the potential purchases of the company. Carbon black went public at $ 19 per share in May 2018.
VMware stated that after the conclusion of the transaction, "VMware will be positioned to provide a highly differentiated, intrinsically safe cloud that will better protect workloads and enterprise customers through big data, data security, and business intelligence. Behavioral analysis and to AI. " second half of the current fiscal year. The Company has indicated that it intends to fund the purchase price from cash on hand and existing short-term borrowing capacity.
The company also announced that it has entered into a definitive agreement with the purchase of Pivotal Software (PVTL), a VMware-controlled company by Dell Technologies (DELL). The companies had previously indicated that they were discussing a transaction.
The terms of this transaction call for VMware's acquisition of Pivotal for a "weighted price" of $ 11.71 per share, with $ 15 per share in cash for Class A holders and the exchange of class VMware shares B against Pivotal shares held by Dell at a ratio of 0.055 VMW Class B shares for each class B PVTL share. VMware stated that Pivotal's total consideration was $ 2.7 billion.
The net cash payment from VMware in the agreement will be $ 800 million. VMW shares issued to Dell for their Pivotal shares will increase Dell's stake in VMware from 0.34 point to 81.09%.
As with the Carbon Black transaction, the cash portion will be financed by cash on hand and existing short-term borrowing capacity. This agreement should also be finalized before the end of the exercise.
And then there was the news on earnings. For the quarter ended Aug. 2, VMware reported revenue of $ 2.44 billion, up 12 percent over the previous year, and barely more than Street estimates. GAAP was $ 1.60 per share, one nickel higher than consensus expectations. Licensing revenue reached $ 1.01 billion, up 12%.
"Based on another strong quarter, we are pleased to announce our intention to acquire Pivotal and Carbon Black," said CEO Pat Gelsinger in a statement. "These acquisitions address two critical technology priorities of all current businesses: creating modern enterprise-level applications and protecting workloads and enterprise customers." With these actions, we are significantly accelerating our subscription and SaaS offerings and developing our ability to enable the digital transformation of our customers. "
Pat Gelsinger, CEO of VMware, said in an interview that the company had confirmed its forecast for the second half of the year and saw no significant impact on its business of macroeconomic factors. He stated that the two agreements announced today would be positive from the operating profit point of view during fiscal year 2021, and would be relutifs on the basis of net income during the year. 39, fiscal year 2022. At that time, the two contracts combined should bring in more than a billion dollars in software, a business service figure, bringing the total business figure of the company in the cloud at over $ 3 billion. Gelsinger declined to give details of the cost synergies that could result from both transactions.
Gelsinger added that the company had a "very strong quarter" in the second quarter, with a slight beat on all metrics. He noted that the restructuring of the Americas sales team in the first quarter had worked well, with good growth in the Americas in the second quarter. Although he says the company does not see any macroeconomic issues, he noted however that growth in China was not as large as expected.
VMware shares are down 5.7% after trading hours on Thursday. The pivot is up 8.8% and Dell is unchanged. Carbon black is up 6.2%.
This story has been updated to include comments from the VMware CEO.
Write to Eric J. Savitz at [email protected]
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