VMware Takes a New Approach with Cloud Business

VMware reports third quarter revenue of $1.67 billion as new cloud business unit joint venture announced.

VMware is a company in the middle of tremendous change as EMC is set to be acquired by Dell. But that's not all that VMware has to deal with as the company is now also spinning out a new joint venture Cloud Services business with EMC.

VMware announced the new Virtustream Cloud Services business, as part of the company's third quarter 2015 earnings call on October 20. For the quarter, VMWare reported revenue of $1.67 billion for a 10 percent year-over-year gain. Net income was reported at $256 million, up from $194 million in the third quarter of 2014.

Patrick Gelsinger, VMware's CEO, emphasized during his company's earnings call that he is optimistic about Dell. Once the Dell/EMC deal is done, Dell and Silver Lake will own roughly 28 percent of the economic interests of VMware.

"Dell's incredibly strong go-to-market engine will provide us greatly expanded reach to attach and upsell our full portfolio of products and services," Gelsinger said.

Beyond Dell, the new Virtustream cloud joint venture business unit is another big shift for VMware. The new Virtustream cloud services business will be jointly owned by EMC and VMware, providing customers with a portfolio of hybrid cloud services.

"This new Federation business will bring together the vCloud Air, Virtustream, object storage and managed cloud services from VMware and EMC into one company using the Virtustream brand," Gelsinger said.

The plan is for Virtustream to start in early 2016 and the company will be led by CEO Rodney Rogers, who will report to a board comprised of leaders from both companies.

"Virtustream will be a leader in the largest market for IT infrastructure spending, and we expect Virtustream to become one of the top five cloud service providers globally," Gelsinger said.

EMC first acquired privately-held Virtustream in May of this year for $1.2 billion. Gelsinger explained that the new Virtustream business combines the breadth of public cloud services available from vCloud Air with Virtustream's leading capabilities to run mission-critical applications in the cloud.

"We expect that the Dell and EMC merger along with today's Virtustream announcement will accelerate VMware's growth across all our businesses and that together, these two announcements will generate significant revenue for VMware over the next few years," Gelsinger said.

One area of VMware's business that Gelsinger didn't spend much time talking about is the OpenStack business. VMware has its own VMware Integrated OpenStack product, which was recently updated.

"I think overall the OpenStack market is clearly one where there's a lot of trials and not a lot of production," Gelsiner said. "We have seen that several customers have taken VMware Integrated OpenStack, and are now at scale production with VMware Integrated OpenStack, and finding it to be significantly more robust and a very natural extension of what they're already doing with VMware."

Sean Michael Kerner is a senior editor at Datamation and InternetNews.com. Follow him on Twitter @TechJournalist

Photo courtesy of Shutterstock.

Tags: cloud computing, Dell, VMware

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