VMWare to buy mobile security firm AirWatch in $1.54 billion deal

Wed Jan 22, 2014 7:12pm IST

A 20-year-old woman holds her smartphone as she waits for her friends at a train station before a ceremony celebrating Coming of Age Day at an amusement park in Tokyo January 13, 2014. REUTERS/Yuya Shino

A 20-year-old woman holds her smartphone as she waits for her friends at a train station before a ceremony celebrating Coming of Age Day at an amusement park in Tokyo January 13, 2014.

Credit: Reuters/Yuya Shino

Related Topics

Stocks

   

REUTERS - Cloud software maker VMWare Inc (VMW.N) said it would buy privately held mobile security company AirWatch in a deal valued at about $1.54 billion to tap into rising demand for software security, sending its shares up 3 percent in premarket trading.

Mobile security products are in high demand because cyber attacks on mobile devices have grown exponentially in recent years as sales of smartphones and tablets have surged.

Atlanta-based AirWatch, whose rivals include Cytrix, MobileIron and FrontRange, says it has more than 10,000 customers in 150 countries, including nine of top 10 U.S. retailers.

"With mobile device usage becoming more prevalent in the workplace, we believe this acquisition will prove strategic in complementing and enhancing VMWare's end-user computing business," ISI Group analyst Brian Marshall said in a note.

VMWare said it would pay about $1.18 billion in cash and about $365 million in installment payments and assumed unvested equity.

The company said it expects revenue growth of 16-20 percent in 2015 and 2016, up from previous forecast of 15-20 percent. VMware expects the acquisition to add to adjusted profit in late 2015.

VMware also said its fourth-quarter adjusted revenue is expected to rise 20 percent to $1.48 billion as it sold more licenses to enterprise customers.

Analysts were expecting $1.47 billion, according to Thomson Reuters I/B/E/S.

VMWare, which has been adding more enterprise customers and renewing enterprise licensing contracts at a higher rate over the last year, said license revenue rose about 18 percent to $687 million in the quarter.

AirWatch, founded in 2003, will become a unit of VMWare but 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.

Analyst 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.

VMware sells virtualization software, which enables the creation of a virtual machine that acts like a real computer with an operating system. This helps companies use server and storage space more efficiently and reduce IT costs.

VMWare shares closed at $97.36 on the New York Stock Exchange on Tuesday.

(Reporting by Neha Alawadhi and Soham Chatterjee in Bangalore; Editing by Don Sebastian)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Pictures of the dead

Reuters Showcase

Silicon Valley Women

Silicon Valley Women

Despite lip service, Silicon Valley venture capital still a man’s world   Full Article 

Cyber Attacks

Cyber Attacks

U.S. government's nuclear watchdog victim of cyber attacks - report  Full Article 

Net Neutrality

Net Neutrality

Online video stars mobilize for U.S. net neutrality  Full Article 

'Heartbleed' Bug

'Heartbleed' Bug

U.S. hospital breach biggest yet to exploit Heartbleed bug - expert  Full Article 

Deal Talk

Deal Talk

Infineon agrees to buy Int'l Rectifier for $3 bln in cash  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage