VMware acquires AirWatch in $1.2B deal to build up mobility expertise

Cloud software and virtualization firm VMware said it will spend around $1.2 billion to buy AirWatch, which specializes in mobile device management and enterprise mobility. Analysts see the deal as a way for VMWare to expand its mobile presence and get a foothold to better compete against the likes of BlackBerry (NASDAQ:BBRY), IBM, Citrix and others.  

VMware will acquire privately owned AirWatch for $1.175 billion in cash and approximately $365 million of installment payments and unvested stock options. AirWatch is stressing continuity in the deal, and the companies said the AirWatch team will continue to report to co-founder and CEO John Marshall as part of VMware's End-User Computing group, which is led by Sanjay Poonen, the executive vice president and general manager of the group. Alan Dabbiere, AirWatch's co-founder and chairman, will be overseeing a new AirWatch operating board which will report to VMware CEO Pat Gelsinger.

On a conference call Wednesday morning, Gelsinger said AirWatch will bring talent and mobility knowhow to VMware, according to ZDNet, and that VMware plans to expand AirWatch to a global scale. Founded in 2003, AirWatch says it serves more than 10,000 customers  across 150 countries and 1,600 employees. The company's rivals include MobileIron and FrontRange,

In an interview with FierceWireless, Marshall said that over the past year AirWatch has expanded its MDM offering to include content, apps and security. "We recognized the importance of the platform," he said.

BlackBerry (NASDAQ:BBRY), under CEO John Chen, has made it clear it will not cede control of the enterprise market and that its BlackBerry 10 platform can perform mobile device management for other smartphone platforms, not just BlackBerry. Chen has said BlackBerry's enterprise mobility management customer base is much larger than competing vendors, that it manages more mobile devices than any other vendor, and that it has substantial cash and is not a venture-capital-backed firm. BlackBerry said Tuesday it will divest the majority of its real estate holdings in Canada, which some analysts see as a move to raise cash.

Marshall said the key difference between AirWatch and BlackBerry is that AirWatch's platform is more neutral, even though BB10 can support Android and iOS devices. He said AirWatch never took money from carriers or device OEMs. "It's a fundamentally different story," he said.

Industry analyst Brian Marshall told Reuters that AirWatch had raised about $225 million in funding from Insight Venture Partners and Accel Partners. "AirWatch revenue last year may have been in the $125-$150 million range," he said.  

Poonen told FierceWireless that while VMware is a major cloud layer, clouds are moving from mainframe computers to client servers and to mobile clouds and devices. "If you play in cloud but don't play in the mobile space, you almost over time become irrelevant to the desktop," he said. "We felt that AirWatch was the undisputed gold medal," he added, and that VMware  "began to see AirWatch distancing themselves from the pack."

The deal came together over the last six months. "We're very excited about this," he said. "We think this is going to be a seminal point in both AirWatch and VMWare's growth targets."

Analysts said the deal should benefit VMware as it seeks to be more aggressive in mobile. "VMWare sees AirWatch as a way to more fully extend its mobile offerings (Horizon) which while interesting, had not kept pace with much of the rest of the market," industry analyst Jack Gold wrote. "New management under Sanjay Poonen, who was a major force behind SAP's mobile expansion, have now taken a further step to become a major player in mobile and more particularly in mobile cloud. Poonen has moved into a realm he knows much about--mobile--which is why VMWare hired him in the first place. This acquisition is a direct shot across the bow aimed at SAP, IBM, Citrix, Oracle and others that VMWare see as a threat to their mobile cloud and virtualization ambitions."

The deal could spur more action in the enterprise mobility market. "As Ovum has been talking about for the last two years, this market is fast consolidating and only a few independent leaders now remain: Good Technology, MobileIron, SOTI, plus the likes of Apperian in the MAM space," Ovum analyst Richard Abslaom said. "These vendors are now going to face stiff competition from megavendors such as IBM, SAP, Dell and CA, as well as VMware, Citrix, and security vendors such as Symantec and McAfee. And with several other big names yet to make major moves (HP, Microsoft for example and maybe even Oracle, which has made a relatively small acquisition in Bitzer Mobile), those remaining independent leaders look like ripe targets."

For more:
- see this release
- see this ZDNet article
- see this Reuters article
- see this GigaOM article

Related Articles:
NetMotion's new CEO Prusch: BlackBerry's struggles highlight fast-moving enterprise mobility world
BlackBerry's Chen aims to get Android, iOS and even Windows Phone customers using BlackBerry for enterprise
Q&A with John Marshall of AirWatch
Savvis extends VMware hybrid cloud services to business customers
VMware tackles Android fragmentation with Verizon-backed dual persona solution

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