VMware Buying Part of EMC: When Son Buys From Dad (VMW, EMC)

You have to always wonder a bit when a partial spin-out makes a deal to acquire software products from its parent company.  After the close of trading came word that VMware, Inc. (NYSE: VMW) entered into a definitive agreement for VMware to acquire certain software products and expertise from EMC Corp. (NYSE:EMC)  for its Ionix IT management business.  The deal includes solutions to deliver improved management and deployment of servers and applications in a virtualized data center.  The price tag sounds small at up to $200 million for VMware considering its market capitalization of almost $20 billion.

VMware noted that it believes it is essential to this evolution of virtualization and cloud computing and will establish VMware’s vCenter as the next generation management platform for private cloud infrastructures.

The terms of the deal are all-cash and up to $200 million and should close in the second calendar quarter of 2010.  Both companies said the transaction will not have a material impact on either company’s previous expectations for 2010.  It also won’t likely bite too far into VMware’s $2+ billion cash.

VMware will acquire all technology and intellectual property of FastScale, Application Discovery Manager, Server Configuration Manager and Service Manager.  The company will also maintain engineering, marketing, sales and support operations in the United States, Europe, Israel, India and Australia.  EMC will retain the Ionix brand and have full reseller rights to continue to offer customers the products acquired by VMware.

This is not a total dividing up of the VMware and EMC ties. In fact, it sounds far from it.  But when you see a deal like this being announced, you have to wonder when the parent will finally cut its ties to VMware as it owns the super-majority stake in the company.

JON C. OGG