EMC buys cloud services provider Virtustream for $1.2 bn

The world's biggest data storage systems provider EMC Corp is buying privately-held cloud services firm Virtustream for approximately $1.2 billion in an all-cash deal, aiming to expand its cloud offerings to support all applications.

''With the addition of Virtustream, EMC completes the industry's most comprehensive hybrid cloud portfolio to support all applications, all workloads and all cloud models,'' EMC said in a statement.

Mary Land-based Virtustream, founded in 2009 by Rodney Rogers and Kevin Reid, is one of the world's fastest-growing cloud software and services companies helping enterprises to migrate, run and manage mission-critical applications in the cloud, including SAP.

Virtustream with its data centres in Washington DC, San Francisco and London delivers its products to global customers directly and through its partners. The firm's customers and partners include Coca-Cola, Heinz, Kawasaki, Intel, IBM, SAP etc.

''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 Joe Tucci.

''With Virtustream in place, EMC will be uniquely positioned as a single source for our customers' entire hybrid cloud infrastructure and services need. It's a game changer,'' Tucci added.

The transaction, approved by the boards of both the companies, is expected to close in the third quarter of 2015, subject to customary closing conditions.

It will have no material impact to EMC's financial results in 2015 and is expected to be accretive to earnings in 2016, EMC said.

Massachusetts-based EMC offers data storage, information security, virtualisation, analytics, cloud computing and other products and services to large as well as small and medium-sized businesses.

EMC subsidiary VMware Inc, which it acquired in 2004, is a provider of cloud and virtualisation software and services. The unit reported its slowest revenue growth in seven quarters in April.

Amid growing competition from rivals such as NetApp, IBM, Hewlett-Packard, and Hitachi Data Systems, and falling sales in its main data storage products business, EMC has been looking to expand its cloud services business.

Further to the acquisition, Virtustream will form EMC's new managed cloud services business and operate as a separate EMC Federation business. Virtustream's CEO Rodney Rogers will report to Joe Tucci, EMC chairman and CEO.

EMC Federation partners will get access to Virtustream's xStream cloud management software which they can use to deliver their own branded services.

''We're proud to be joining the EMC Federation where our combined capabilities, products and services will allow us to accelerate our vision of delivering the platform of record for enterprise systems, and address the complete breadth of cloud computing needs,'' Rogers said.

According to some analysts, the acquisition, although makes strategic sense, is not enough to put EMC on a consistent growth path and more aggressive M&A focus and strategy are needed to improve the company's financials.

EMC has been under pressure from its investor Elliot Management Corp to spin off VMware. However, the current acquisition signals that a corporate breakup is not near.