Contact: Scott Denne
VMware picks up desktops-as-a-service company Desktone as the virtualization pioneer faces a slowdown in its core business. As we noted earlier, VMware’s software licenses grew by only $20m through the first half of the year, well below the $200m pace it set for itself for 2013, and this deal indicates that it’s looking toward services to partially offset that lost growth.
While VMware’s last few deals have been aimed at extending its core infrastructure technologies into related areas such as networking, storage and systems management, the acquisition of Desktone, along with the release of vCloud Hybrid Service earlier this year, show VMware emphasizing its ambitions to be a cloud services vendor, not just a cloud tools provider.
Desktone was funded with $29m in venture capital across two rounds, with the most recent coming it 2010. That same year the company brought in a new CEO, Peter McKay, and changed its business model to offering the virtual desktop service directly to customers – going from a business with almost zero sales to one that now has about 150 direct and service-provider customers and anticipates hitting profitability this year. (We’ll have a more detailed report on this transaction in our next 451 Market Insight.)
Our own estimates of the virtual desktop market put it at $3.8bn this year and growing at 21.9% annually. By our own back-of-the-envelope calculations, Desktone will likely account for roughly $10-$14m of that market this year.
For more real-time information on tech M&A, follow us on Twitter @451TechMnA.