EMC to take Virtustream majority stake - report

Reuters reports that VMware will no longer own 50 per cent of new cloud services business

VMware is not going to take a 50 per cent stake in the hybrid-cloud platform Virtustream, with EMC set to take majority control, according to a report from Reuters.

In the days following the Dell-EMC deal was announced, a new cloud services business was unveiled that will combine EMC, VMware and Virtustream's cloud offerings and bring them under the Virtustream moniker.

Under this plan, the Virtustream business would be owned 50/50 by EMC and VMware. But when it was announced, Jonathan Chadwick, VMware's CFO, said Virtustream will put a $200m to $300m hole in VMware's finances in 2016. And following this announcement, VMware's share price plunged by nearly 20 per cent to $55.42 and has stayed around this mark over the last month.

Earlier this week Re/code reported that VMware and EMC shareholders have asked for Virtustream to be unwound, as it has been responsible for "further dragging down VMware shares".

Now, according to the Reuters report, which cited people familiar with the matter, EMC is going to take a majority stake in Virtustream and VMware would only have a minority share. This would mean EMC would assume Virtustream's losses, the report said.

On Tuesday, the day the report was released, VMware's share price went from $57.84 to $60.77.

One VMware partner, who did not wish to be named, said regardless of the Virtustream composition, other cloud providers offer more attractive offerings.

"My opinion is we are probably just going to offer Amazon and HP," he said. "VMware are big, but the others are bigger and I think they are a bit late to the day and are one step behind Amazon and Azure who are at the forefront."