Enterprise software company VMware Inc. on Aug. 22 announced agreements to buy two software companies with a combined enterprise value of $4.8 billion.
The agreements cover the acquisitions of software and services company Pivotal Software Inc. — controlled by Dell Technologies Inc., which also holds a majority stake in VMware — and cybersecurity company Carbon Black Inc.
VMware will acquire Pivotal for a blended price per share of $11.71, comprised of $15 per share in cash to class A stockholders, and the exchange of shares of VMware's class B common stock for shares of Pivotal class B common stock held by Dell, at an exchange ratio of 0.0550 shares of VMware class B stock for each share of Pivotal class B stock. In total, the merger consideration represents an enterprise value for Pivotal of $2.7 billion, the companies said.
Carbon Black will be acquired in an all-cash transaction for $26 per share, representing an enterprise value of $2.1 billion.
"These acquisitions address two critical technology priorities of all businesses today — building modern, enterprise-grade applications and protecting enterprise workloads and clients. With these actions we meaningfully accelerate our subscription and SaaS offerings and expand our ability to enable our customers’ digital transformation," VMware CEO Pat Gelsinger said.
VMware also disclosed its results for the second fiscal quarter on Aug. 22, reporting net income of $4.93 billion, or $11.83 per share, up from $644 million, or $1.56 per share, for the same period in 2018. The gain was largely attributable to a $4.9 billion discrete tax benefit resulting from an internal transfer of international intellectual property rights, partially offset by a $538 million unrealized loss on a strategic investment in Pivotal Software.
The S&P Global Market Intelligence normalized EPS estimate for VMware's just-ended quarter was $1.55.
VMware reported total quarterly revenue of $2.44 billion, up 12% year over year from $2.17 billion. License revenue was $1.01 billion, up from $900 million a year earlier. Services revenue increased to $1.43 billion from $1.27 billion. The company's operating income rose to $523 million in the second fiscal quarter from $509 million in the same period of 2018.
