The past few weeks have been the most turbulent and uncertain in VMware's history.
The day before this year's VMworld Europe in Barcelona Dell announced the biggest acquisition in IT history to acquire EMC and thus VMware. And with the ink barely dry on the deal, it was announced days later that a new cloud services business will be created that will combine the EMC, VMware and Virtustream's cloud offerings and bring them all under the Virtustream brand.
Inevitably the spin around the deal and the Virtustream move was that it would prove wholly positive for VMware, with CEO Pat Gelsinger (pictured below) commenting: "We are very optimistic about the long-term value to VMware of the Dell and EMC merger and of our new Virtustream business."
Gelsinger was also brazen about the future of Virtustream, claiming it will dominate the market.
"Virtustream will be a leader in the largest market for IT infrastructure spending, and we expect Virtustream to become one of the top five cloud service providers globally," he said.
But the immediate reality seems worrying, as Jonathan Chadwick, VMware's CFO, noted Virtustream will put a $200m to $300m hole in VMware's finances in 2016. And the markets have not reacted too kindly to the Virtustream venture, with VMware's share price plummeting by nearly 20 per cent in the hours after it was announced.
The VMworld event in Barcelona was dominated by questions about what the Dell-EMC deal will mean for VMware, and speaking with execs at the event very little was given away apart from that it would of course greatly benefit the company and its partners.
Indeed Jo Tucci, EMC's CEO, later admitted the message about what the acquisition means for VMware has not been explained well enough.
"I don't think we've done as good a job as we need to do in explaining the power of this combination and explaining why it's not only good for EMC shareholders and Dell, but also is going to be very good for the VMware shareholders," he said.
Perhaps the biggest indication about what the future holds for VMware comes with the Virtustream announcement, but speaking to partners they feel there is a clear lack of clarity around its trajectory. Questions are being asked as to whether or not VMware will remain public in the long run and if its vendor alliances will be damaged by the historic Dell takeover.
Behind the spin
This feeling of ambiguity about what will become of VMware was expressed by Justin Harling (pictured below), managing director of reseller CAE.
"My opinion at the moment is there is only one set of people who really know what they are getting out of this whole scenario, and that's the investors," Harling said. "Predictably, the message we are getting from Dell, EMC and VMware is of course very upbeat. All the competition are taking the opposite view and saying it's going to create uncertainty. We are receiving nothing but predictable messaging.
"On the back of that, as much as it's a little cliché, change tends to give rise to opportunity," he said. "What we expect is there will be opportunity coming out of all the different business units. The difficulty at the moment is being able to quantify what those [opportunities] are, and exactly how the channel and we as a business will be affected by it."
Harling said he wanted VMware to maintain its disruptive nature, and make continued investment in its products and development.
"What we don't want to see from VMware, and this is probably the one downside of them as a public company, is them just being regarded as a cash cow business which is there just delivering a consistent return," he said. "I can see how that suits investors very well, but we would like to see more innovation and more disruption."
Public or private
With the deal, EMC is to join Dell as a private company, and VMware is to remain in public ownership. When asked about this, Carl Eschenbach, VMware's president, said staying public will ensure that the company keeps hold of its identity.
"At VMware we have our own identity, our own culture," he said. "We are a young disruptive software-driven technology company, and we don't want to lose that engagement with our ecosystem and our customers."
But Michael Dell has previously extolled the virtues of going private and Graham Brown, managing director of reseller Gyrocom, was not convinced that VMware will stay public.
"My bet, and this is a personal view, is that Michael Dell will look to potentially bring the company private at some stage," he said. "Whether or not he consumes it into the same business, I'm not so sure about that. There is a lot of revenue derived from VMware's OEM relationships and I can't see in the foreseeable future him bringing it together with Dell."
Brown was on the whole positive about the acquisition, and felt it would benefit VMware and its partners in the long run.
"I think this enables VMware to go away and do what it needs to do, essentially. If I was in the parent EMC company, I would be a little more nervous as I can see that certain parts of that being sold off over time, even if it's just to foot the bill. But I think this will strengthen VMware; it provides a stronger organisation to work into."
One of the central questions posed at VMworld was how the Dell deal will affect VMware's technology alliances, as it works with hardware vendors that compete directly against Dell.
Eschenbach said that VMware will be able to work out a system of maintaining these relationships, just as it has done following the EMC takeover 11 years ago. He added that it's in Dell's interest to make sure VMware, and its vendor alliances, are successful.
"If you look at the Dell acquisition of EMC, which gets an 80 per cent ownership of VMware, I can assure and promise you one of the key components of making this work, and being able to pay off the large debt Dell has taken on, is to make sure VMware is still successful," he said. "We are in a complex operating environment from a competitive perspective, and it's something we are accustomed to and will figure out moving forward."
But Brown at Gyrocom said that the deal could create worries for VMware's allies.
"I have thought about it and the guys who are going to be the most nervous about the acquisition are the existing OEM partners; the HPs, Lenovos even the Nutanixs," Brown said.
Wilfredo Sotolongo, Lenovo's EMEA vice president of enterprise group sales, said although there was uncertainty about his company's future relationship with VMware, it was vital that they continued to work together.
"We don't know what they are going to do, we know as much as you do, so there is no point in speculating," he said. "With that said, we are a major server vendor, and they are a major provider into the datacentre; no matter what, we are going to have to work as a team and collaborate with our clients. I can't speculate on whether they are going to cut us off, I have to service our clients."
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