VMware’s offense, Pivotal’s break.
Pivotal was split from VMware’s business six years ago and is now back.
August 14, According to CNBC, cloud computing service provider VMware plans to acquire Pivotal, a software development platform, sourced from VMware, Pivotal and Dell yesterday to the US Securities and Exchange Commission (SEC). A document submitted.
The document shows that a special committee of VMware and Pivotal’s board of directors is negotiating a final agreement on the deal, which is VMware’s purchase of all outstanding shares of Pivotal’s Class A common stock at a price of $15 per share.
The purchase price of $15 per share is much higher than Pivotal’s closing price of $8.30 on Wednesday, which is basically the same as the IPO price. As soon as the acquisition came out, Pivotal’s share price soared nearly 72% in after-hours trading.
The relationship between VMware and Pivotal is inextricably linked. Most of the shares are held by Dell. Let’s take a look at the development of these two companies:
In 1998, VMware was founded, and five years later, it was acquired by storage giant EMC;
In 2013, Pivotal was jointly invested by EMC, VMware and GE (General Electric);
In 2015, EMC was acquired by Dell for $67 billion.
Pivotal is split from VMware and EMC’s business, focuses on big data and cloud platform markets,VMware is leading the way in virtualization and cloud computing services.
This Pivotal was acquired by VMware and is not unrelated to its ups and downs over the past year. Pivotal was listed on the New York Stock Exchange in April last year, with an issue price of $16.75 per share and a valuation of $3.9 billion. Soon after, the stock climbed to $28.91. But after Pivotal released its disappointing second-quarter earnings, its share price fell 41%.
After the financial report was released, Pivotal was also sued by two shareholders. The main reason was that the earnings report did not mention the incompatibility between the company’s PaaS (Platform as a Service) technology and Kubernetes. Kubernetes is the industry standard for container management orchestration developed by Google.
The terms PaaS, Kubernetes, etc. sound complicated and easy to explain.
First of all, cloud computing includes three service modes, the bottom IaaS, Infrastructure-as-a-Service; the middle layer PaaS, ie PlAtform-as-a-Service (the platform as a service); the top of the SaaS, Software-as-a-Service (software as a service).
Image Source: Fresh Jujube Classroom
VMware’s main business is IaaS (Infrastructure as a Service), and Pivotal is focused on PaaS (Platform as a Service), providing Cloud Foundry platform for many companies.
Cloud computing relies on virtualization. The concept of “container” was introduced during the development process, followed by the open source platform Kubernetes (somewhat like a container housekeeper) that automates container operations. The current Kubernetes-based container service has become a standard for almost every cloud platform.
It can be understood that the problem that PaaS technology is incompatible with the industry standard Kubernetes makes Pivotal unable to fully meet the needs of customers in cloud computing services, resulting in the company facing the dilemma of prolonged sales cycle and weakening growth. In the predicament, Pivotal was acquired by VMware or a broken direction.
From VMware’s point of view, VMware’s acquisitions and cooperation over the past year have continued. On July 19 this year, VMware announced the acquisition of AI startup Bitfusion to support workloads based on artificial intelligence and machine learning. On July 30, it announced a new partnership with Google to make it easier for companies to run VMware on Google Cloud.
VMware started with virtualization products and entered the enterprise private cloud market after the rise of cloud computing. Nowadays, it also occupies the head position, and the product line covers almost all the business lines of the private cloud. In May of this year, VMware announced the first quarter financial report for the fiscal year 2020, the total revenue during the financial period was 2.27 billion US dollars, an increase of 13%, net profit of 505 million US dollars.
This proposed acquisition of Pivotal, VMware said “Pivotal is a long-term strategic partner, we have been successfully collaborating to help companies with application development and infrastructure transformation.”
This transaction will help VMware’s business diversify. After all, everyone wants to take a share on the big cake of cloud computing..