EMC to acquire VMware for $635M

Lower costs for customers promised

Two months after announcing a deal to buy content management company Documentum Inc. (see story), storage vendor EMC Corp. today announced another acquisition, unveiling plans to buy virtualization software company VMware Inc. for $635 million.

In its announcement, Hopkinton, Mass.-based EMC said the acquisition will help bring EMC's customers new options for lowering costs and simplifying operations using virtualization technologies across their IT infrastructures.

Palo Alto, Calif.-based VMware's technology enables multiple operating systems, including Microsoft Windows, Linux and Novell NetWare, to run simultaneously and independently on the same Intel-based server or workstation and dynamically move live applications across systems. The software creates a single pool of available storage and computing resources to make management easier for IT administrators, according to VMware.

The acquisition is expected to be completed early in the first quarter of 2004.

"Customers want help simplifying the management of their IT infrastructures," Joe Tucci, EMC's president and CEO, said in a statement. "This is more than a storage challenge. Until now, server and storage virtualization have existed as disparate entities. Today, EMC is accelerating the convergence of these two worlds."

In a statement, Diane Greene, president and CEO of VMware, called the acquisition "a natural fit."

"Beyond the obvious product synergies, EMC's leadership in advancing open standards and its relationships with the leading IT players will foster ongoing innovation and industrywide cooperation," she said. "VMware will continue its deep relationships with the world's leading server and storage vendors as well as ISVs and systems management providers to jointly develop useful innovation for our customers."

EMC said it will take a charge of between $15 million and $20 million in the first quarter of 2004 after the deal is completed to cover VMware's in-process research and development costs and other integration expenses.

EMC said it will operate VMware as a software subsidiary of EMC after the deal is completed. VMware will remain in Palo Alto and continue to be led by Greene.

Copyright © 2003 IDG Communications, Inc.

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