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November 25, 2015

EMC & VMware joint venture Virtustream hits the rocks

News: Pressure from shareholders could see the 50/50 deal scrapped.

By James Nunns

The EMC and VMware joint ownership in Virtustream is in doubt after plans emerged suggesting that EMC is to retain a majority stake.

The joint venture had proposed as a 50-50 share between EMC and VMware, however, it now looks as though EMC will retain a majority stake with VMware either having no share in Virtustream or a much smaller share.

The purpose of this is to lift VMware’s shares, which have declined in value since Dell’s decision to buy EMC for $60 billion was announced. It is thought that the removal of VMware from the Virtustream venture will boost its shares.

EMC would keep a majority stake and assume Virtustream‘s losses, meaning that VMware would only have a minority stake. This would help ease concerns related to the mega-merger, according to Reuters sources.

Additional reports have claimed that pressure from shareholders is forcing the joint venture to be scrapped.

The proposed Virtustream venture consists 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.

EMC described the acquisition of Virtustream in May for $1.2bn as a "game-changer."

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Neither company has commented on the reports. The joint venture is set to close in January.

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