VMware swoops on Nicira as profits fall

Virtualisation goliath continues on acquisition trail with $1.26bn purchase

VMware has splashed $1.26bn on software-defined networking outfit Nicira as it announced a fall in quarterly profits.

The virtualisation kingpin saw net profit slip 13 per cent on an annual comparison to $192m in what it claimed was a "strong" second quarter.

Results in Europe were "mixed", chief operating officer Carl Eschenbach said in a conference call, although the UK experienced healthy demand. Total revenues rose by 22 per cent to $1.12bn.

The EMC-owned firm has made a rapid-fire series of acquisitions and added to its shopping cart last night by grabbing Nicira for $1.05bn in cash and about $210m in assumed unvested equity awards.

Talking on the call, a transcript of which can be found here, outgoing chief executive Paul Maritz (pictured), said the acquisition fitted in with VMware's strategy of providing the software ingredients of the software-defined datacentre.

"With the acquisition of Nicira, VMware becomes well positioned to provide virtual network functionality not just in the context of vCloud and vSphere, but to be able to provide it to other heterogeneous non-vSphere-based pools of infrastructure as well," he explained.

"So this represents a deepening and a broadening of our strategy."

VMware last week confirmed that Maritz is vacating the VMware hotseat in September after four years in the role. He will be replaced by EMC executive Pat Gelsinger.

Meanwhile, Eschenbach said he remained cautious about the potential for slower IT spending, especially in Europe.

"Despite these macro concerns, our deal pipeline remains very strong, and we expect to have a solid second half of 2012," he said. "Demand for vSphere remains solid, and we are seeing increased opportunities for larger deals that also include management and automation solutions, cloud application solutions such as vFabric and GemFire and desktop virtualisation."