By Lisa Beilfuss
EMC Corp. said Tuesday it has agreed to acquire privately held
Virtustream for $1.2 billion, a move that may suggest a corporate
breakup isn't looming.
The all-cash transaction is expected to close in the third
quarter and has been approved by both companies' boards. EMC said
the deal won't have a material impact on this year's financial
results and is expected to add to revenue and per-share earnings in
2016.
Chief Executive Joe Tucci called the Virtustream deal "a game
changer," adding that it is "a critical and transformative
acquisition for EMC in one of the industry's fastest-growing and
most important sectors."
Massachusetts-based EMC sells systems used to store corporate
business information and maintains an unusual federation of related
companies that collaborate but also compete at times. The
federation structure has been under attack by Elliott Management
Corp. since last summer, and Elliott has been pressuring EMC to
spin off its stake in VMware Inc., among other things.
EMC has a cloud presence through VMware. The Virtustream
addition appears to be another step in building EMC's federation
structure and a potential sign that no breakup is forthcoming.
"Strategically, we believe this is a very logical deal for EMC
as it helps round out its hybrid cloud offerings and contributes to
another cross-selling opportunity within the company's federation
of offerings," said analysts at FBR Capital Markets.
But while the deal makes strategic sense, FBR added, "it does
not move the needle financially, and we continue to believe
strategic changes and a more aggressive M&A focus are necessary
ingredients to help put EMC back on the path to more consistent
growth."
Virtustream, founded in 2009, provides cloud services to
government and enterprise customers including SAP SE, Coca-Cola Co.
and Hess Corp. Its xStream cloud software platform is tightly
integrated with VMware vSphere, the companies said.
EMC shares, down about 12% this year, fell 2.4% in morning
trading.
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