A NY Times article reported that VMware, the market leader in Virtualization and affiliate of the TNS Group, proposed a 420 million acquisition of SpringSource, a popular maker of open-source Java development tools. The acquisition is evidence that VMware is looking to expand beyond its virtualization services and increase its already profitable business.
According to the article VMware said it expects the transaction, which contains $362 million in cash and equity and the assumption of $58 million in stock options, to be final by September. Spingsource structured itself around facilitating companies creating business software via the Java programming language.
These type of apps tend to run on top of Windows or the open-source Linux operating system. VMware, however, has been on a mission to bring a broad set of business applications closer to its virtualization software, which has become popular with companies looking to save on capital equipment costs. VMware has created technological advances that have been saving customers money since its inception. By reducing energy and operational costs by almost 80%, virtualization has become a very popular term for CFO’s and CIO’s abound. Recently, the company has moved to expand beyond this role through a broad suite of management tools. Ultimately, VMware aims to sell customers software capable of managing entire data centers. In June VMware took a 5 percent stake in Terremark, a hosting company based in Miami.
The SpringSource deal illustrates the latest success for an infrastructure software maker during the recession. SolarWinds, a networking management software seller, sold shares in an initial public offering of stock in May and LogMeIn, which makes software that lets consumers and administrators log into their systems from afar, had a successful I.P.O. in July.
With many devices now being made with open-source code, companies like Springsource have been able to find a niche in the sagging economy. VMware’s aggression into the ever expanding software industry is one that will benefit it in the future. While the company could remain in its current concentration of virtualization and still do just fine, it is taking a proactive step into another market. With Microsoft nipping at its heels in the virtualization department, I applaud VMware for proposing this large scale acquisition and think now would be a great time to jump on their bandwagon before the seats run out..
Joe Carretta
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