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EMC is buying managed cloud expert Virtustream for $1.2bn

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The deal will reinforce Enterprise Hybrid Cloud strategy

Storage giant EMC is buying American Infrastructure-as-a-Service provider Virtustream for $1.2 billion, aiming to rebrand it as its own managed cloud services business.

The acquisition is thought to be an attempt at offsetting the slowing revenue growth across EMC’s traditional hardware business.

”Virtustream is an exceptional company and this is a critical and transformative acquisition for EMC in one of the industry’s fastest-growing and most important sectors,” said CEO Joe Tucci.

“With Virtustream in place, EMC will be uniquely positioned as a single source for our customers’ entire hybrid cloud infrastructure and services needs. We could not be more delighted that Virtustream will be joining the EMC Federation family. It’s a game changer.”

The game of clouds

Virtustream was founded in 2009 to provide enterprise-class IT in the cloud. The company offers extensive cloud security, performance SLAs and charging based on usage, not resource allocation. It attracted a total of $129.6 million in venture capital - most recently, $40 million in a Series D round in September 2013.

Virtustream’s xStream cloud management software platform is tightly integrated with VMware vSphere - yet another reason why the company is a good fit for EMC and its Enterprise Hybrid Cloud approach.

”With the addition of Virtustream, we will be able to offer customers a comprehensive set of hybrid cloud offerings, including private, managed and public cloud solutions,” said Pat Gelsinger, CEO of VMware.

”As we deliver VMware vCloud Air to our customer base to help them continue their journey to the cloud, Virtustream complements and expands our value proposition.”

The deal has been approved by both boards and is expected to close in the third quarter of 2015. EMC says it will not have an impact on this year’s results, but will add to the company’s revenue and profit in 2016.

According to the Wall Street Journal, acquisition of Virtustream could indicate that EMC is not planning to split the VMware business from the rest of the EMC Federation, going against the wishes of activist investor Paul Singer and his Elliott Management Corpopration.

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