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TheStreet Open House

VMware Grabs AirWatch for $1.54B

Stocks in this article: VMW EMC

NEW YORK (TheStreet) - VMware (VMW - Get Report) opened up its wallet, announcing a $1.54 billion deal for mobile security specialist AirWatch.

AirWatch develops software for mobile device management, mobile application management and mobile content management. "With mobile device usage becoming more prevalent in the workplace, we believe this acquisition will prove strategic in complementing and enhancing VMW's end-user computing business," wrote ISI Group analyst Brian Marshall, in a note released Wednesday.

The Atlanta-based firm has over 10,000 customers around the world and employs more than 1,600 people. ISI Group estimates that AirWatch's 2013 revenue was between $125 million and $150 million.

VMware will buy AirWatch for $1.175 billion in cash and around $365M of installment payments and assumed unvested equity.

"AirWatch provides best-in-class, secure, enterprise-mobile management to thousands of businesses around the world," said VMware CEO Pat Gelsinger, in a statement. "With this acquisition VMware will add a foundational element to our end-user computing portfolio that will enable our customers to turbo-charge their mobile workforce without compromising security."

The deal has been approved by the boards of both companies and is expected to close towards the end of this year's first quarter. The purchase will be funded with a combination of cash on VMware's balance sheet and proceeds from around $1 billion of additional debt provided by VMware's parent company EMC (EMC).

TheStreet's Jim Cramer recently described virtualization trailblazer VMware as an exciting company and "a very good stock". The company's shares have gained more than 37% over the last six months.

Virtualization lets users divide physical hardware into multiple "virtual" chunks and has grown in popularity among users looking to juggle myriad of operating systems and applications.

VMware also announced its preliminary fourth-quarter results before market open, reporting revenue of $1.48 billion, up 15% on the prior year's quarter and above analysts' estimate of $1.47 billion.

Shares of VMware dipped 1.86% to $95.55 before market open on Wednesday.

--Written by James Rogers in New York.

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