VMWare (NYSE: VMW), the world’s largest virtualization software company, which is controlled by EMC (NYSE: EMC) bought Nicira for $1.05 billion and $210 million of unvested equity awards. The deal will move VMWare quickly into the rapidly expanding cloud computing space.

Management commented:

“VMware has led the server virtualization revolution, and we have the  opportunity to do the same in datacenter and cloud networking,” said Paul  Maritz, chief executive officer, VMware. “The acquisition of Nicira adds to our  portfolio of networking assets and positions VMware to be the industry leader in
software-defined networking.”

The company also announced Q2 earnings. The two pieces of news caused VMW shares to slip after hours.

For the quarter:

—  Revenues for the second quarter were $1.12 billion, an increase of 22%
from the second quarter of 2011, and 23% measured in constant
currency.

—  Operating income for the second quarter was $212 million, an increase
of 13% from the second quarter of 2011. Non-GAAP operating income for
the second quarter was $358 million, an increase of 23% from the
second quarter of 2011.

—  Net income for the second quarter was $192 million, or $0.44 per
diluted share, compared to $220 million, or $0.51 per diluted share,
for the second quarter of 2011.   Non-GAAP net income for the quarter
was $296 million, or $0.68 per diluted share, compared to $235
million, or $0.55 per diluted share, for the second quarter of 2011.

Douglas A. McIntyre

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