EMC To Acquire VMware For $635 Million

Storage software maker EMC Corp. on Monday said it had agreed to acquire VMware Inc., an Intel-based virtual computing software company, for $635 million in cash.

Palo Alto, Calif.-based VMware is the third Northern California software company acquired by Hopkinton, Mass.-based, EMC since July. The acquisition is expected to be completed early in the first quarter of next year, following regulatory approvals.

VMware's technology enables different operating systems to run simultaneously and independently on the same Intel-based server or workstation, and allows IT administrators to move live applications across systems without business disruption, company officials said.

These "virtual machines" integrate into existing physical infrastructures and management frameworks, and provide system administrators with greater flexibility in managing and optimizing resources across an enterprise.

EMC said the acquisition will play a key role in its strategy to lower customers' costs and simplify their operations by providing technology that enable organizations to dynamically configure and reconfigure their computer and storage environments with no downtime.Upon completion of the acquisition, EMC expects to take a charge of approximately $15 million to $20 million in the first quarter of 2004 for the value of VMware's in-process research and development costs and other integration expenses.

The transaction is expected to decrease EMC's earnings per share in the first quarter of 2004 by 1 cent per share. It is not expected to impact the full year's earnings, but is projected to increase the company EPS by 1 cent a share in fiscal year 2005.

EMC plans to operate VMware as an EMC subsidiary, headquartered in Palo Alto and led by Diane Greene, VMware's current president and chief executive.