EMC and VMware launch managed hybrid cloud joint venture using Virtustream brand

EMC-owned Virtustream set to become outlet for storage and virtualisation firm's hybrid cloud managed services

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Chronicling the Dell-EMC merger news

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EMC and VMware have set out plans to create a jointly owned hybrid cloud services business operating under the Virtustream brand, just a week after Dell agreed to acquire the storage giant.

The companies are jointly tipping Virtustream to become a leading provider of hybrid cloud services to the enterprise by focusing on the delivery of managed services in on-premise environments, as well as infrastructure as a service (IaaS) and public cloud offerings.

To achieve this, a range of storage, virtualisation and converged infrastructure managed service offerings from EMC, VMware and VCE, respectively, will be added to the Virtustream product portfolio.

The transaction is expected to be finalised by the start of 2016, with current Virtustream CEO Rodney Rogers set to retain his position as the head of the firm, while VMware CEO Pat Gelsinger and EMC chief Joe Tucci are set to join the company’s board of directors.

Details of the joint venture were revealed during a conference call about VMware’s third-quarter results on 20 October, where Gelsinger predicted the deal will open up new revenue-generating opportunities for VMware.

“We expect the company to grow fast and generate multiple hundreds of millions of dollars of revenue for VMware in 2016,” said Gelsinger, on a call transcribed by Seeking Alpha.

“Virtustream will be a leader in the largest market for IT infrastructure spending, and we expect it to become one of the top five cloud services providers globally.”

The initiative has not come completely out of the blue, as EMC first aired plans to use the acquisition of Virtustream, which it announced in May 2015, to create a new cloud business unit earlier this year.

Dell-EMC merger: Adding to the complexity

The timing of the deal threatens to add another layer of complexity to the $67bn Dell-EMC merger, though, which will see VMware continue to operate as an independent, publicly traded entity, while the rest of EMC goes private. 

During the conference call, it was confirmed that Virtustream will join the VMware family, with the reporting of its financial results set to be included with VMware’s in future.

Read more about the Dell-EMC merger

With regard to the firm’s third-quarter results, VMware posted revenues of $1.7bn, which it said exceeded the high end of its expectations, but admitted to seeing a slowdown in sales more recently as a result of the speculation surrounding the future of its parent, EMC.

That said, the company’s COO, Jonathan Chadwick, admitted the EMC-Dell merger could give rise to some degree of uncertainty regarding VMware’s future, which it expects to be reflected in future financial updates.

“Clearly, Virtustream will have an impact on our 2016 results. In addition, we experienced softer bookings than we planned for in the third quarter. We believe this is partly due to some disruptive impact resulting from speculation associated with VMware’s future,” he said.

“Although we expect the Dell acquisition of EMC will give rise to significant revenue synergies for VMware over time, we believe it is realistic to anticipate various disruptions in the meantime.”

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