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The deal is a go. The chip giant is going to pay $60 billion in cash and stock for the company, and $8 billion in debt.
It's not an inexpensive transaction, but thanks to a provision that gives VMware 40 days to negotiate with other parties, it's possible.
After chewing through analyst notes on the deal, Ron and Alex ended up on opposite sides of the issue. Ron thinks that the company's value is higher than its recent financial results suggest, while Alex thinks that the company is not performing well enough to deserve a higher price.
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After Dell spun out the company, we speculated who might buy it, and after Amazon, Microsoft, and IBM were listed as potential buyers, we were vindicated. The fact that we didn't see a potential suitor for the company underscores our view that it's not the right buyer for the company.
Let's talk about the pros and cons of the matter, ask what VMware is worth, and how it may have value over and above its recent quarterly results. Ron is saying something.
Bernstein agrees that it is hard to imagine anyone paying more than $61 billion.
The value of the company goes beyond its balance sheet and profit and loss statement. The company might not have had a perfect first quarter, but it has a set of skills that could fit nicely with any of the big cloud infrastructure providers.
The cloud infrastructure-as-a-service exists today because of the early crew at VMware. If a server was underutilized, it was too bad. The way for cloud computing is paved by the use of virtual machines.
Since its early days, cloud computing has changed a bit, but it remains a core tenet of the market. Imagine if one of the three or four cloud vendors, like Amazon, Microsoft, or even IBM, brought VMware into its fold.
The more you know about VMware, the more you know about virtualization. It has gained various capabilities by acquiring companies like Heptio, a containerization startup launched by Craig McLuckie and Joe Beda, two of the people who helped create Kubernetes.
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