May 26, 2015 / 12:20 PM / 4 years ago

EMC to buy Virtustream for $1.2 billion to expand cloud offerings

(Reuters) - Data storage products maker EMC Corp EMC.N said it would buy privately held Virtustream for about $1.2 billion in cash to expand its cloud offerings.

EMC has been looking to strengthen its cloud services offerings as it struggles with slowing sales growth in its main data storage products business.

The company said on Tuesday that Virtustream would operate as its new managed cloud services business after the transaction closes.

Virtustream was founded in 2009 by Chief Executive Rodney Rogers and Chief Technology Officer Kevin Reid. The company’s customers include the Coca-Cola Co (KO.N), Intel Corp (INTC.O), Heinz and Hess Corp (HES.N).

“With the addition of Virtustream, EMC will enable customers to move their entire application portfolio into a cloud environment,” EMC said.

The company said the deal, expected to close in the third quarter, was expected to add to its revenue and profit in 2016. The deal will have no material impact on EMC’s 2015 results, the company said.

EMC, which reported slowing sales growth for the past two quarters, slashed its full-year revenue and profit forecasts in April.

Virtualization software maker VMware Inc (VMW.N), in which EMC holds an 80 percent stake, reported its slowest revenue growth in seven quarters in April, hurt by sluggish technology spending and a stronger dollar.

EMC has been facing pressure from activist investor Elliott Management Corp to spin off VMware. EMC has decided not to spin off the business, Reuters reported in February, citing sources close to matter.

EMC’s shares were up about 1 percent at $27.04 in premarket trading on Tuesday.

Reporting by Lehar Maan in Bengaluru; Editing by Kirti Pandey

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