VMware Looking to Buy Some Growth with Acquisition of Virsto

Andrew Klips |

VMware Inc. (VMW) said after Monday’s closing bell that it has penned a definitive agreement to acquire privately-held Virsto Software, a provider of software that optimizes storage performance and utilization in virtual environments, as it looks to expand its growth opportunities via a bigger storage portfolio that maximizes its clients’ virtual infrastructure.

Financial terms of the agreement were not disclosed, but VMware did say in a corporate statement that it plans on closing the deal in the first quarter, subject to customary conditions.

Virsto is said to deliver “breakthrough storage optimization technologies” that improve storage performance and utilization which, when implemented within a virtual desktop infrastructure, can reduce the cost of storage per desktop by as much as 70 percent.

"VMware is committed to continuing to deliver software innovations that bring significant efficiencies to our customers while simplifying infrastructure and IT," said John Gilmartin, VMware’s vice president of storage and availability.

"VMware and Virsto share a highly aligned vision to remove complexity and increase efficiencies through virtualization," added Mark Davis, chief executive of Virsto.

Not disclosing the finances associated with the deal with leave analysts guessing as to how much value the acquisition brings to VMware.  In the waning days of January, the company provided fourth-quarter earnings that beat analyst predictions, but missed on guidance estimates for the full year 2013, sending the stock price tumbling from $98 to $77.

At the same time, VMware said that it would be cutting 900 jobs in low-priority areas, a blow that was not softened by plans to actually increase its staff by about 1,000 people in 2013 by growing high-priority areas.

Shares of VMW have lumbered around the $78 mark since the earnings report and a series of downgrades from analysts at Morgan Stanley, Piper Jaffray and more.  On Monday, the company did get a little light shown on it with an upgrade from “Equal-weight” to “Overweight” by Evercore Partners analyst Kirk Materne.  In a note, Materne said that he believes a more normalized rate of growth is “baked into” shares and VMware’s guidance and the downside risk is low from these levels.

Shares of VMW closed Monday trading down by 2.7 percent at $77.04 and only eked modestly higher after the acquisition news in extended trading.

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Companies

Symbol Name Price Change % Volume
CHMG Chemung Financial Corp 34.28 -0.82 -2.34 11,786
VMW Vmware Inc. Class A 80.58 -0.17 -0.21 1,193,653

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