Contact: Scott Denne
Aside from being its largest deal to date, the $1.54bn acquisition of MDM company AirWatch marks another milestone for VMware. While the rationale aligns with its other recent transactions, AirWatch itself does not. VMware typically acquires tuck-ins or early, promising technologies that bring it little revenue.
VMware’s dealmaking in the past two years has reflected its ambition to cover more of the IT stack. Working from a foundation in server virtualization, VMware extended into storage (picking up Virsto Software for $184m), networking (grabbing SDN startup Nicira for $1.26bn) and endpoints (buying Wanova, Desktone and now AirWatch).
Virsto was only doing a few million in sales by our estimate, Nicira was just starting to work with customers, and Wanova had just begun to grow its sales when it was taken out. Not so with AirWatch, which VMware expects will add $75m in revenue in 2014 (assuming a late Q1 close). In fact, according to an analysis of The 451 M&A KnowledgeBase, VMware has only twice in its history picked up companies with more than $25m in sales (Shavlik Technologies and SpringSource), and most have been far below that mark.
While $75m isn’t enough to immediately move the needle – VMware expects to post about $6bn in 2014 – it’s not surprising that the potential for a larger sales boost would appeal to VMware as it doesn’t put up the growth rates it once did, especially in software license revenue (as we noted earlier). License revenue grew just 9% in 2013, compared with 13% in 2012 and 31% the year before that.
VMware anticipates that there’s still plenty of upside in AirWatch and the MDM market, a thesis that aligns with our own surveys. According to TheInfoPro, a service of 451 Research, MDM is the top security concern, with 18% of respondents indicating that it was one of their top three pain points. In those same surveys, AirWatch moved up over BlackBerry to third place in 2013, from fourth a year earlier, as the most implemented MDM and mobile device security categories.
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[…] Scott Denne of The 451 Group writes about the AirWatch acquisition on the firm’s blog post in “AirWatch brings to VMware what few deals have before: revenue.” Denne writes, “VMware anticipates that there’s still plenty of upside in AirWatch and the […]