A leading provider of virtualization infrastructure software solutions, VMware Inc. (VMW) recently signed a definitive agreement to acquire Shavlik Technologies. However, the terms of the agreement were not disclosed.
The acquisition is expected to be completed later this quarter, subject to satisfaction of customary closing conditions.
New Brighton, Minnesota-based Shavlik Technologies is a leading provider of cloud based information technology (IT) solutions for small and medium-sized businesses (SMBs).
Shavlik’s portfolio comprises on-premise and SaaS-based management solutions, which enable SMBs to effectively manage, monitor and secure their information technology (IT) environment. Moreover, Shavlik’s solutions ensure easy and smooth transition to the cloud for the SMBs.
Both VMware and Shavlik boast proven track records of delivering easy-to-use, cost-effective IT solutions that enable SMBs to take advantage of modern, transformative IT models like virtualization and cloud computing.
VMware and Shavlik’s joint offering VMware GO (available since 2009) assists SMBs in the rapid deployment and management of VMware vSphere.
VMware remains focused on developing its footprint in the SMB sector. In the first quarter of 2011 (ended March 31, 2011), VMware witnessed strong demand in the SMB market for Enterprise and Enterprise Plus versions of vSphere, which carry lower average selling prices (ASPs).
In the first quarter, VMware also introduced the first up-sell option for VMware’s hosted management offering for SMB customers looking to purchase additional management capabilities including patch and software updates.
The Shavlik acquisition should improve VMware’s penetration in the SMB sector, as SaaS-based solutions from Shavlik are expected to enhance the company’s portfolio with solutions for Managed Service Providers (MSPs) and Solution Providers that could serve their SMB customers better.
We also believe the acquisition will provide a competitive edge to VMware against its nearest rival Microsoft Corp. (MSFT) in the SMB market.
Recommendation
We believe the increasing adoption of virtualization and cloud computing technologies will drive growth for VMware over the long term.
Enterprises shifting toward the cloud need proper infrastructure, which VMware provides through its four key products: vSphere that helps in coordinating and automating computer storage and networking; vShields for virtualized Edge functions and security; vCloud Director to enable cloud functionality; and the recently launched vCenter Operations Suite for management.
We believe VMware is the biggest beneficiary in the adoption of cloud computing and the corresponding shift in IT environment. The server virtualization market possesses huge potential and VMware continues to expand its presence in the datacenter cloud management and security.
We have an Outperform recommendation on VMware over the long term (for the next 6 to 12 months). Currently, VMware has a Zacks #2 Rank, which implies a Buy rating on a short-term basis.
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