* VMware 4th-qtr, 1st-qtr revenue forecast beats analysts'
* AirWatch to add $75 mln rev in 2014; add to adj profit in
* Deal a threat to BlackBerry: analysts
* Competitors could look for acquisitions also: analysts
* VMware shares rise 2.5 pct
By Soham Chatterjee and Neha Alawadhi
Jan 22 Cloud software maker VMware Inc
said it would buy privately held mobile security company
AirWatch for $1.54 billion to tap into rising demand from
companies to secure the smartphones and tablets used by
While some analysts view the deal as a threat to BlackBerry
Ltd , which has long been the go-to for
companies looking for security products, others say the deal
could spur more acquisitions in the mobile security market.
VMware itself has entered this market recently. Its main
business is making virtualization software, which creates a
virtual machine that acts like a real computer. This helps
companies cut IT costs by saving on server and storage space.
"AirWatch will be the center of our mobile activities," CEO
Pat Gelsinger told Reuters. "We are really bringing together the
strength we have in PCs and desktops with AirWatch's in the
The VMware-AirWatch deal is the third major acquisition in
the mobile security market, a business which ABI Research
estimates will double to more than $1 billion by 2015. ()
Last year, IBM bought mobile device management
company Fiberlink Communications, while Citrix Systems Inc
bought Zenprise in 2012.
UBS analyst Amitabh Passi said the deal will make it more
challenging for BlackBerry as it now faces strong competitors
and said he expects Google Inc, Apple Inc and
Microsoft Corp to look for acquisitions to bolster
their presence in the mobile enterprise market.
VMware shares were up 2.3 percent at $99.57 in afternoon
trade on the New York Stock Exchange after the company also
forecast fourth-quarter and current-quarter revenue above
BILLION DOLLAR DEAL
AirWatch, founded in 2003, will become a unit of VMware and
its 1,600 employees will continue to report to AirWatch founder
and Chief Executive John Marshall. AirWatch co-founder and
Chairman Alan Dabbiere will report to VMware CEO Pat Gelsinger.
Atlanta-based AirWatch, whose rivals include MobileIron and
FrontRange, says it has more than 10,000 customers including
United Airline, Renault, and nine of the
top 10 U.S. retailers.
VMware said it would pay about $1.175 billion in cash and
about $365 million in installment payments and assumed unvested
equity. It will borrow $1 billion from parent EMC Corp
to pay for the acquisition.
AirWatch is VMware's second billion-dollar deal in
one-and-a-half years after the company bought Nicira, a provider
of network virtualization software, in 2012.
AirWatch is expected to add about $75 million to revenue in
2014 after the deal closes late in the first quarter. VMware
expects the acquisition to add to adjusted profit in late 2015.
VMware also said it would provide a bridge loan of $25
million to AirWatch if the deal fails to close by June 1.
Analyst Brian Marshall said AirWatch had raised about $225
million in funding from Insight Venture Partners and Accel
Partners. "AirWatch revenue last year may have been in the
$125-$150 million range," he said.
VMware has been adding more enterprise customers and
renewing enterprise licensing contracts at a higher rate over
the last year.
The company said it sold more licenses to enterprise
customers in the fourth-quarter, and estimated adjusted revenue
rose about 20 percent to $1.48 billion.
Analysts were expecting revenue of $1.47 billion, according
to Thomson Reuters I/B/E/S.
It said it expects first-quarter revenue of $1.33-$1.37
billion, largely above analysts' average estimate of $1.34
VMware forecast revenue of $5.94-$6.1 billion for 2014.
Analysts expect revenue of $5.95 billion in 2014.