EMC coughs up the readies for cloud management software supplier

EMC is buying Virtustream in a seemingly billion-dollar-level transaction, as part of an effort to build a managed cloud services business.

Virtustream sells xStream cloud management software for public, private and hybrid clouds, Infrastructure-as-a-Service (IaaS) and managed services to its customers.

It says its xStream technology, powered by µVM (microVM)^* technology, helps customers move on-premises apps to the cloud, giving such apps “enterprise-grade security and compliance, performance SLAs, multi-tenant efficiency and consumption-based charging for both legacy and web-scale applications".

Virtustream history:

• Founded in 2008 by President/CTO Kevin Reid and Chairman/CEO Rodney Rogers
• 2009 — $9.6m venture funding
• 2010 — $343K venture funding
• Feb 2011 — $9.8m A-round
• July 2011 — $10m B-round
• March 2012 — $15m B-round<<?li>
• November 2012 — $5m C-round
• 2013 — $40m D-round
• 2014 — achieve $100m revenue run rate

Total finding is $104.7m and a 4-5x payout would be $524m, but think higher, think an 11.4x payout. This is a $1.2 billion all-cash deal.

Virtustream customers include Coca-Cola, Domino Sugar, Heinz, Hess Corporation, Kawasaki, Lexmark, Scotts Miracle-Gro and a global set of service provider partners.

Virtustream has a focus on I/O-intensive mission-critical enterprise applications such as SAP S/4HANA and others, and its xStream technology is integrated with vSphere and designed to deliver SLASs.

EMC claims Virtustream represents a transformational element of its strategy to help customers move all of their applications, including mission-critical ones, to cloud-based IT environments. It will be a separate business in the EMC federation with CEO Rodney Rogers reporting to EMC federation chairman and CEO Joe Tucci.

Virtustream’s cloud software and IaaS portfolio will be delivered directly to customers and through partners. EMC Federation service provider partners will have access to the xStream cloud management software platform and be able to adopt and deliver their own branded services based upon it.

This Virtustream business will, in effect, build on and be incorporated into the EMC Federation Enterprise Hybrid Cloud Solution, which currently is an on-premises private cloud offering with on-ramps to public cloud services such as VMware’s vCloud Air.

Tucci said: "With Virtustream in place, EMC will be uniquely positioned as a single source for our customers’ entire hybrid cloud infrastructure and services needs.”

In a blog by EMC president Chad Sakac he says: "EMC does managed services today for a lot of customers – but only really around for storage services. This business is growing rapidly – but there’s a huge demand for more, things like the Federation Enterprise Hybrid cloud on VxBlock and VxRack as a managed service. When you see that demand – you need to jumpstart things."

Read about xStream Here.

The deal is expected to close in the third quarter, to have no material impact to EMC financial results in 2015 and is expected to be additive to revenues and accretive to earning-per-share in 2016. ®

* The µVM is a composite measurement of computing resource usage, equivalent to 200MHz of CPU, 768 MB of memory, 40 storage input/output operations per second (IOPS) and 2Mbit/s of networking bandwidth.