VMware is calling it quits on the agreement with EMC to form Virtustream as a jointly owned company.
VMware made the announcement in a filing with the SEC and follows rumours last month that the company would either have no stake or a much smaller one. Officially, it now seems that VMware will have no stake at all.
The proposed Virtustream venture would have consisted of VMware’s vCloud Air hybrid cloud service, Virtustream’s Infrastructure-as-a-Service, VCE’s Cloud Managed Services, and EMC’s Storage Managed and Object Storage services.
VMware stock has been hit significantly through the turmoil of the Dell/EMC mega merger, displayed by a significant drop in stock price for VMware. On the 7th October the stock price was $82.09, by October 20th the stock hit $55.42.
Following the Virtustream announcement, stock price has risen very slightly to $57.05, suggesting there is still a lot of restlessness.
There is a vast amount of complexity regarding the EMC and Dell merger, with issues regarding tracking stocks.
To pay for the mega merger, Dell and its investor Silver Lake proposed using tracking shares that are linked to VMware. So the decline of VMware‘s shares reduces the hypothetical value of the proposed tracking stock. This may have taken a further hit should Virtustream report a financial loss, but now that VMware is not tied to it, there is no threat.
EMC told TechCrunch: "EMC is 100% committed to Virtustream, which represents our fastest-growing Federation entity and continues as the focal point of EMC’s mission-critical, enterprise-class cloud strategy. Virtustream will stay tightly aligned to VMware through the Federation partner model."
