VMware sticks a fork in its $2.7B deal to buy Pivotal

VMworld
VMware closes its $2.7 billion deal to buy Pivotal Software, which is a key element of its Kubernetes strategy. (FierceTelecom)

VMware is closing out the year by putting a bow on its $2.7 billion deal to buy Pivotal Software, which was first announced in August.

While VMware previously worked with Pivotal, the deal is a key element in the company's transformation into an end-to-end cloud-native vendor for telcos and enterprises.

RELATED: VMware snags Carbon Black and Pivotal for $4.8B

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By buying Pivotal outright, along with previous deals to buy Kubernetes startup Heptio and Bitnami, VMware is taking on the likes of Red Hat via a new Kubernetes platform called Tanzu. VMware has said the new Tanzu products and services would help enterprises build modern applications, run Kubernetes with consistency across environments, and manage all their Kubernetes clusters from a single control point.

RELATED: VMware is all-in on Kubernetes, says CEO Gelsinger

“VMware Tanzu is built upon our recognized infrastructure products and further expanded with the technologies that Pivotal, Heptio, Bitnami and many other VMware teams bring to this new portfolio of products and services,” said VMware's Ray O’Farrell, executive vice president and general manager of the Modern Application Platforms Business Unit, in a blog post that announced the deal had closed on Monday.

As a result of the deal closing, Pivotal's Class A shares were removed from the New York Stock Exchange with trading suspended before the market opened on Monday, and Pivotal is now a wholly-owned subsidiary of VMware.

Prior to the acquisition, Dell Technologies owned controlling stakes in both VMware and Pivotal, which made the deal a bit more complicated. Pivotal, which has made its mark commercializing the open-source Cloud Foundry platform, was spun out of EMC Corporation, which is now Dell EMC, and VMware in 2013. Both VMware and Dell EMC contributed assets to Pivotal.

Pivotal went public in April of last year, but shares of its stock declined 66% over the past year. After issuing guidance that was lower than analysts' expectations, Pivotal's stock dropped 41% on June 5.

VMware had an existing relationship with Pivotal—including the jointly developed VMware Enterprise PKS— but VMware CEO Pat Gelsinger previously said that buying Pivotal outright would give VMware the "build" capability it needs to provide a full stack for Kubernetes.

Tanzu, which was announced at VMworld 2019 in August, includes a technology preview of Project Pacific, which is focused on transforming VMware vSphere into a Kubernetes native platform in a future release. It also includes VMware Tanzu Mission Control, which a single point of control that allows customer to manage all their Kubernetes clusters regardless of where they run. VMware is using Bitami, which is acquired in May, to provide a catalog of pre-built Kubernetes clusters.

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