(Reuters) - Cloud software maker VMware Inc said it would buy privately held mobile security company AirWatch for $1.54 billion to tap into rising demand from companies to secure the smartphones and tablets used by employees.
While some analysts
view the deal as a threat to BlackBerry Ltd, which has long been the
go-to for companies looking for security products, others say the deal
could spur more acquisitions in the mobile security market.
VMware itself has entered this market recently. Its main business is making virtualization software,
which creates a virtual machine that acts like a real computer. This
helps companies cut IT costs by saving on server and storage space.
will be the center of our mobile activities," CEO Pat Gelsinger told
Reuters. "We are really bringing together the strength we have in PCs
and desktops with AirWatch's in the mobility space."
The VMware-AirWatch deal is the third major acquisition in the mobile security market, a business which ABI Research estimates will double to more than $1 billion by 2015. (r.reuters.com/cuf36v)
Last year, IBM bought mobile device management company Fiberlink Communications, while Citrix Systems Inc bought Zenprise in 2012.
analyst Amitabh Passi said the deal will make it more challenging for
BlackBerry as it now faces strong competitors and said he expects Google Inc, Apple Inc and Microsoft Corp to look for acquisitions to bolster their presence in the mobile enterprise market.
shares were up 2.3 percent at $99.57 in afternoon trade on the New York
Stock Exchange after the company also forecast fourth-quarter and
current-quarter revenue above analysts' estimate.
BILLION DOLLAR DEAL
founded in 2003, will become a unit of VMware and its 1,600 employees
will continue to report to AirWatch founder and Chief Executive John
Marshall. AirWatch co-founder and Chairman Alan Dabbiere will report to
VMware CEO Pat Gelsinger.
AirWatch, whose rivals include MobileIron and FrontRange, says it has
more than 10,000 customers including United Airline, Renault, and nine
of the top 10 U.S. retailers.
said it would pay about $1.175 billion in cash and about $365 million
in installment payments and assumed unvested equity. It will borrow $1
billion from parent EMC Corp to pay for the acquisition.
is VMware's second billion-dollar deal in one-and-a-half years after
the company bought Nicira, a provider of network virtualization
software, in 2012.
is expected to add about $75 million to revenue in 2014 after the deal
closes late in the first quarter. VMware expects the acquisition to add
to adjusted profit in late 2015.
VMware also said it would provide a bridge loan of $25 million to AirWatch if the deal fails to close by June 1.
Brian Marshall said 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.
has been adding more enterprise customers and renewing enterprise
licensing contracts at a higher rate over the last year.
company said it sold more licenses to enterprise customers in the
fourth-quarter, and estimated adjusted revenue rose about 20 percent to
Analysts were expecting revenue of $1.47 billion, according to Thomson Reuters I/B/E/S.
It said it expects first-quarter revenue of $1.33-$1.37 billion, largely above analysts' average estimate of $1.34 billion.
VMware forecast revenue of $5.94-$6.1 billion for 2014. Analysts expect revenue of $5.95 billion in 2014.
(Editing by Don Sebastian and Savio D'Souza)