EMC To Buy VMware 2

EMC Corp. said Monday it has signed an agreement to acquire software vendor VMware Inc. for around $635 million in cash—its third major acquisition this year

VMware focuses on virtual computing, and if part of EMC, the software will be merged in a way to cover server and storage virtualization. VMware's software lets multiple operating systems, such as Windows and Linux, run simultaneously and independently on the same Intel-based server or workstation and move applications across systems with no interruption in service. The software appears to have much more capacity than is physically there, allowing virtualization customers to take chunks out of their capital hardware costs.

The vendors hope to complete the acquisition, after closing and regulatory approval, during the first quarter of next year. EMC continues an aggressive morphing from a hardware-focuses company to one based on software, including earlier acquisitions Legato and Documentum. EMC hopes to combine its own storage virtualization with VMware to offer a single software platform for servers and storage, and have it work well with information lifecycle management functionality from Documentum and Legato.

Once the acquisition is completed, EMC says, VMware will operate as a subsidiary headquartered in Palo Alto, Calif., and will continue to be led by current VMware CEO Diane Greene.

But one analyst says EMC could have stopped its acquisition spree after buying Documentum. "Legato gave them a lot of server functionality already," says Stephanie Balaouras, an analyst at Yankee Group. "VMware appears redundant."