VMware (NYSE:VMW) and its parent EMC (NYSE:EMC) are the top players in virtualization and enterprise storage and have a stranglehold on the market. There is a lot of speculation that EMC-VMW will spin off its cloud assets into another company. Virtualization and cloud storage are key aspects when transitioning to the cloud and spinning off cloud assets into another company focused on cloud services can boost its effectiveness and growth. The new company can focus on competing with Amazon Web Services, the Google Compute Cloud, and Microsoft Cloud Services while it leaves EMC to concentrate on storage and VMW to concentrate on virtualization. 
The spin-off is likely to include the Cloud Foundry platform-as-a-service (PaaS) division of VMW, EMC’s Greenplum assets and the assets of Project Rubicon, an infrastructure-as-a-service (IaaS) joint venture between VMware and EMC. DynamicOps, which was acquired by VMware recently is also likely to be included in the spin-off.
Cloud Foundry is VMware’s PaaS offering and lets developers deploy applications on the cloud, irrespective of the programming language used, frameworks and other components. Greenplum is EMC’s big data division which sells analytics databases and a successful analytics collaboration software called Chorus.
Project Rubicon is an EMC and VMware joint venture and is an IaaS offering. It includes IaaS-type technologies developed by Mozy; a storage company acquired by EMC in 2007 and taken over by VMware in 2011. DynamiOps is a cloud automation vendor which makes transitioning to the cloud easier by automating much of the process.
The $207 Billion Market
Companies are likely to spend close to $207 billion a year on cloud services and this is a major growth opportunity for EMC-VMware. Currently the market leaders in cloud services are Amazon Web Services, Google Compute Cloud and Microsoft Cloud Services and the spin-off is likely to be made to focus on this big market. A major chunk of this market is likely to be Big Data Analytics and the Greenplum databases and software may be a major player in this space.
- VMware’s Key Growth Areas For Enterprise Customers And End-Users
- VMware Reports Positive Q3 Earnings, Robust Outlook For 2016
- VMware Earnings Preview: End-User Computing, Network Virtualization To Drive Growth
- VMware’s Services Division To Benefit From Sustained Growth In Global Cloud Computing Market
- VMware Earnings: Hybrid Cloud, End-User Computing Services Drive Top-Line Growth
- How Has VMware’s Revenue & EBITDA Composition Changed Over The Last Five Years?
We have a $109 Trefis price estimate for VMware, which is about 20% above the current market price and we have $45.55 Trefis price estimate for EMC which is significantly above the current market price.Notes:
- VMware plans cloud spin out to keep up with Microsoft, Amazon and Google, www,gigaom.com, July 16, 2012 [↩]