The tech industry woke up to some pretty big news on Wednesday morning with the announcement that VMWare is set to acquire AirWatch for $1.54 billion or about a half of a NEST.
As mobile moves from “a thing” to mainstream computing, it was going to be hard for any standalone Enterprise Mobile Management (EMM) company to stay independent. After a massive $200M Series A round last year, AirWatch was reportedly on the path to IPO, as were others in the EMM space. One could read the deal as an acknowledgement that management, as well as perhaps the bankers, agreed with that assessment.
The first takeaway is that it looks like it was a fair deal economically. AirWatch may not have gotten quite as high of a valuation as they might have via an IPO, but the shareholders and investors certainly got more immediate cash in their pockets. Further the breadth of offerings that a combined VMWare-AirWatch duo brings gives greater headroom for growth than an independent AirWatch.
From a VMWare perspective, they got a much better deal than IBM did in its acquisition of FiberLink, for arguably a better company with more clients. Sepharim Group’s Bob Egan summed it up nicely with this tweet:
— Bob Egan (@bobegan) January 22, 2014
UPDATE: I spoke with Bob Egan and he made an error in his tweet. The real AW earnings according to the announcement by VMWare were about $75M, so the multiple is closer to 20. That’s a much richer deal than IBM got for Fiberlink, but perhaps for a better asset. Either way, the guys at Good Technology and MobileIron should be licking their chops as this deal sets the new baseline.
Here are the 3 other things you should take away from the news:
- VMWare just filled a pretty big gap in its vision for End User Computing.
Just as it was going to be hard for an EMM player to stay independent, an end-user computing strategy without a strong mobile play wasn’t getting very far in a mobile dominant world. And while VMWare had tried to build their own EMM solution from the ground up, they weren’t getting far enough fast enough. As Brian Katz noted, this led to a shakeup of the EUC division which resulted in bringing in Sanjay Poonen from SAP. And to his credit (or perhaps following his SAP playbook vis-à-vis SAPs acquisition of Sybase and Syclo), rather than try to continue to build in-house, he gave VMWare a great leap forward with AirWatch.But don’t take my word for it, listen to Sanjay in his own words via a video announcement that appeared on the VMWare blog.
- If you’re an AirWatch customer, you should be happy…but expect a call or 3 from a VMWare rep. If you are an AirWatch customer or considering AirWatch you have nothing to fear. There is no real downside fro the deal. If anything there will be more resources at John Marshall’s command to take the platform forward.If you were both a VMWare and an AirWatch customer you should be overjoyed (or resigned to being locked in for life). You can now imagine a future where there will be an integrated solution to manage the entire stack end-point-to-end-point. This will of course take a while, but the components are there.
But be clear, every acquisition has customer acquisition and cross-selling as a key component to the strategy. So maybe not right away, but your phone is going to ring as vCloud and NSX and other VMWare sales reps try to help you “get the most out of” the combined offerings of the company.
- This won’t be the last acquisition in the EMM space. There are still very large cloud/platform players that still need a strong mobile management offering. Oracle for one, Cisco another possible candidate. You would think HP is in the market, though their struggles with mobile (and just about everything else recently) make them too hard to predict. Salesforce released a much stronger mobile element to their PaaS platform as part of Salesforce1, so they are probably not looking for a purchase at this time.Luckily there are companies like MobileIron and Good Technology there for the taking. And much like a run on wide receivers in fantasy football, the appearance of “positional scarcity” will drive up the prices for those firms.
If you have any thoughts or concerns about the deal may impact your company, please contact us at [email protected] or in the comments.