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VMware Inc. has been researching cloud-based startups for months while entering into agreements with former enemies such as Amazon.com Inc. and Alphabet Inc., but edits made by the publisher software reached a new level on Thursday.
VMware
VMW, + 0.04%
announced planned acquisitions of two public companies – Pivotal Software Inc.
PVTL, + 0.22%
and security software company Carbon Black Inc.
CBLK, + 7.69%
– with a combined value of nearly $ 5 billion. Movements indicate that VMware is committed to offering its customers a broader cloud software suite while playing with cloud computing providers such as Amazon.
AMZN, -0.98%
and Alphabet
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GOOG, -0.14%
Google.
"The acquisitions announced today will enable us to reach our goal of providing more comprehensive and reliable solutions for the cloud," said VMware CEO Pat Gelsinger on Thursday. midday. "Pivotal strengthens our ability to help our customers create modern applications quickly and efficiently, while Carbon Black strengthens our ability to protect enterprise applications and workloads with an intrinsically safe platform."
"With both companies, we will be the only vendor able to provide software solutions that enable customers to create, run, manage, connect, and protect any application on any cloud or device," he said. he added.
Since last month: VMware CEO Gelsinger is ready to work with rivals
The Pivotal agreement would bring together two companies already closely linked. Pivotal is a spin-out of VMware and the former EMC parent company, acquired by Dell Technologies Inc.
DELL + 0.12%
The transaction implies that VMware is trading its shares in Dell – which will increase its stake in VMware from 0.34% to more than 81% once the transaction is completed – in exchange for Pivotal shares and redeems other shareholders of Pivotal at $ 15 the action. which, according to VMware, translates into a weighted price per share of $ 11.71 and a business value of $ 2.7 billion.
Pivotal focuses on development tools for cloud-based software – as MarketWatch wrote when released, Pivotal is a cloud-based software that creates more cloud software. The stock price of $ 15 is exactly what Pivotal asked for in its initial public offering in April 2018, but shares had recently traded below that level, after that a disappointing earnings report from the previous quarter was a catastrophic blow to the company's stock price. and Dell reported an upcoming transaction last week.
Carbon Black went public less than a month after Pivotal and has the same features, in that it offers cloud software that aims to secure the use of cloud software by other companies. Carbon Black sold $ 19 worth of IPO shares each, but its prices were trading at a level below that level for months before a solid earnings report in May propelled stocks higher. VMware has agreed to pay $ 26 per share for the company, which saw its stock jump 7.7% to $ 24.50 in the regular Thursday before the announcement, and another 6.2% after the normal hours.
These two acquisitions add to the two cloud-based startups that VMware agreed to buy in the second quarter, as the company continued to build relationships with cloud computing partners that were once considered like mortal enemies. In an interview with MarketWatch last month, Gelsinger said that mergers and business partnerships are and will continue to be major drivers of VMware's business strategy and growth.
VMware – which is hosting its annual VMworld conference in San Francisco next week – is expecting both deals to be completed in the second half of the year. Chief Financial Officer Zane Rowe said at Thursday's teleconference that VMware would commit $ 2.8 billion in net cash in both acquisitions, using cash on the balance sheet and short-term debt.
"We expect Pivotal and the carbon black to add more than two points of revenue growth and more than $ 1 billion in essentially hybrid cloud subscription and [Software-as-a-Service] VMware's total revenue in the first year and significantly increase our total revenue and our hybrid cloud and SaaS subscriptions to more than $ 3 billion in the second year, "said Rowe at Thursday teleconference. "We expect the combination of Pivotal and Black Black to deliver a positive operating result in the first year and a positive cash flow and EPS result in the second year."
VMware shares fell more than 3% after announcements, after announcements, which were consistent with Q2 results. VMware shares have gained 8% since the beginning of the year, which is lower than the S & P 500 index.
SPX, -0.05%
a gain of 16.7% over the same period.
For the second quarter, VMware reported net earnings of $ 4.93 billion, or $ 11.93 per share, largely thanks to a $ 4.9 billion tax benefit resulting from an internal transfer. intellectual property. Revenues for the quarter were $ 2.44 billion, up from $ 2.17 billion in the same quarter last year.
After adjusting for the tax benefit as well as for costs such as stock-based compensation, VMware reported a profit of $ 1.60 per share, compared with $ 1.54 for the same quarter of the year. Previous year. Analysts expect on average that VMware will release an adjusted profit of $ 1.55 per share for a business turnover of $ 2.43 billion, according to FactSet.
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