The worldwide public IT cloud services market is a $35 billion industry today and is expected to grow to $73 billion by 2015, according to IDC. The hosted web services market, a part of the IT cloud services market, is dominated by Amazon (NASDAQ:AMZN) with its Amazon Web Services and Microsoft‘s (NASDAQ:MSFT) Azure Cloud and Google Cloud Platfrom. In an attempt to gain a share of this $2 billion market, storage provider EMC (NYSE:EMC) and virtualization giant VMware (NYSE:VMW) have announced a collaboration to launch a new virtual organization called the Pivotal Initiative where both the companies will commit key technologies, people and programs to focus on Big Data and Cloud Application Platforms. The new entity will be led by Paul Maritz, Chief Strategy Officer of EMC.  This will enable EMC and VMware to focus on their core competencies while pursuing the growing cloud services market.
- Dell-EMC Deal Finally Closes: A Look At How The Merger Could Impact HPE & IBM
- EMC Earnings Takeaways: Flash Array, VMware, Services Continue Growth
- EMC Earnings Preview: Storage Hardware Sales To Remain Suppressed, Services To Drive Growth
- Why You Should Take A Closer Look At EMC’s EPS Growth
- How A Worldwide Decline In Storage Systems Sales Impacts EMC
- How Valuable Is EMC’s Information Storage Business?
The new initiative will employ nearly 1,400 people, approximately 600 of them from VMware and 800 from EMC. The business divisions involved in the new unit from EMC are Greenplum and Pivotal Labs, while VMware will contribute with vFabric, Spring and Gemfire, Cloud Foundry and Cetas.
The new organization will enable EMC to focus on the cloud services market, to take on Amazon Web Services and Microsoft cloud Azure. EMC has acquired many assets in cloud computing, Big Data and the analytics space such as Greenplum and Pivotal Labs, while VMware has assets to build software-defined data centers and end user computing. To make a successful and effective cloud services company, it will benefit the two companies’ discrete capabilities to come together and work under a single entity, and this is the primary reason for creating the collaboration. The companies are set to announce the official structure of the organization in Q1 2013, and we expect this will add value to EMC and VMware in 2013.
According to our analysis, virtualization software is is the largest division of VMware and accounts for nearly 90% of the company’s value. We have a $110 Trefis price estimate for VMware, which is around 25% above the current market price.Notes: