A Closer Look at VMware’s Acquisition of AirWatch

VMware is making a habit of monster acquisitions these days. Back in July 2012 the company bought network virtualization specialist Nicira for $1.05 billion, and now the sever virtualization leviathan has put hand into pocket again. This time the price tag is $1.54 billion, and the item in VMware’s shopping basket is AirWatch, a privately held mobile device management (MDM) and security company.

So what’s a server virtualization company like VMware doing getting into the mobile device management racket? The obvious motivation is to make money — the same motivation that drove VMware to buy Nicira. But just as the Nicira acquisition signaled a concerted effort in the virtual networking space, the AirWatch acquisition heralds a new drive from servers and desktops into servers, desktops and the rapidly expanding mobile computing arena.

“AirWatch will be the center of our mobile activities,” CEO Pat Gelsinger said to Reuters. “We are really bringing together the strength we have in PCs and desktops with AirWatch’s in the mobility space.”

“With this acquisition VMware will add a foundational element to our end-user computing portfolio that will enable our customers to turbo-charge their mobile workforce without compromising security,” he added in a prepared statement.

There’s some concern that VMware may have overpaid for the Atlanta-based AirWatch, but there’s no doubt the company has got itself a gem. AirWatch is highly regarded and is one of a select group of mobile device management market leaders in Gartner’s mobile device management software magic quadrant.

VMware has been involved in desktop virtualization for some time, even if VDI has never taken off in the way that many people were predicting a few years ago. This involvement has broadened to include mobile devices, and pushing applications to these mobile devices, as smartphones become the new desktops. The AirWatch acquisition will expand VMware’s End-User Computing group, and AirWatch’s offerings will form an expanded portfolio of mobile solutions that are complementary to VMware’s portfolio, the company says.

Where VMware has been weak is its lack of any compelling and overarching mobile device management strategy. The AirWatch acquisition solves the problem and sets VMware up rather nicely for the future, at a single, billion dollar stoke.

If VMware had any doubts about its strategy it probably consoled itself with the fact that the mobile device management market has been consolidating around a few big players, and that it was worth paying big bucks to ensure the company bagged itself a winner. Last year IBM bought MDM company Fiberlink Communications and, more significantly, server virtualization competitor Citrix also bought Zenprise, another big name in the MDM space. So VMware probably felt it had to pay up and make a move sooner rather later.

The acquisition will be funded through a combination of VMware’s existing cash and by borrowing $1 billion, handily provided by VMWare’s parent company EMC. VMware will also continue with its ongoing share buyback program.

One word of warning, though. It took about a year before the Nicira acquisition produced tangible new products in the form of VMware NSX, so at that rate, don’t expect any fully VMware-ized AirWatch-based products until 2015.

Paul Rubens is a technology journalist and contributor to ServerWatch, EnterpriseNetworkingPlanet and EnterpriseMobileToday. He has also covered technology for international newspapers and magazines including The Economist and The Financial Times since 1991.

Follow ServerWatch on Twitter and on Facebook