VMware $635m sale builds EMC on Intel

Leading storage vendor EMC is looking to make its third major takeover of this year with its acquisition of virtual computing software company VMware for about $635m (£360m).

In July, EMC bought storage software company Legato. This was followed in September by the acquisition of document management company Documentum, due to be completed this week.

The new all-cash deal for VMware is intended to give EMC an advantage in Intel-based system environments.

Erez Ofer, EMC's executive vice president of technology strategy, told vnunet.com that the purchase was needed to fill out EMC's infrastructure management offering.

"IBM, Hewlett Packard and Sun control their respective Unix environments, and EMC will interface with them. But this will allow us to gain greater control of our destiny on Intel platforms," he said.

Ofer denied that the takeover price was high, saying it represented only about three times next year's projected revenue from VMware, which would continue to be run as an independent unit.

He confirmed that other companies had shown interest in VMware, but would not comment on rumours that these included Microsoft.

VMware software enables multiple operating systems - Windows, Linux and Novell NetWare - to run simultaneously on a single Intel-based system.

"EMC is looking to become a complete player in managing the storage environment," said Hamish Macarthur, managing director at storage consultancy Macarthur Stroud International.

"But users want to use more than one supplier in their infrastructure, especially at higher levels of investment, meaning multiple operating systems. VMware provides this."

The move reflects EMC's strategy to balance opening up its proprietary hardware and software portfolio with being smarter to widen its penetration, he added.

But providing this flexibility with, for instance, automatic provisioning of low-cost IP storage, could help them make the justification.

EMC said VMware is also needed as part of the former's efforts to provide its software within switches from companies such as Brocade and McData, with whom EMC is working.

The deal is due to be completed in the first quarter of 2004. Ofer said no redundancies were expected.