VMware buys Pivotal and Carbon Black in $4.8B deal

VMware announced on it’s is acquiring Carbon Black, a publicly traded cyber security company that went public in 2018, focuses on securing modern cloud-native workloads. The price of the acquisition is about $2.1 billion. Carbon Black vaults VMware into endpoint protection. The company provides anti-malware and endpoint protection products that can see into many of a company’s devices and tell if they have been hacked.

In addition, Pivotal has a long history with VMware. VMware has also confirmed the acquisition of Pivotal, Pivotal Software, Inc. (NYSE: PVTL), a leading cloud-native platform provider, today announced that the companies have entered into a definitive agreement under which 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 Technologies.

The merger consideration represents an enterprise value for Pivotal of $2.7 billion. VMware’s revenue for the last quarter was $2.44 billion. That’s a big day for VMware and these deal is expected to close by the end of January 2020. Both Pivotal and VMware are majority-owned subsidiaries of Dell.

Both Carbon Black and Pivotal focus on modern workloads. Pivotal focuses on building modern applications, thanks to its Cloud Foundry heritage and recently added support for Kubernetes, while Carbon Black provides the security features necessary to secure modern applications and infrastructures. The two moves follow the company’s acquisition of Bitnami earlier this year, completing this triquetra of acquisitions that all aim to bring VMware’s technology into a future where VMs are only part of the equation.

Today, marks an exciting milestone for Carbon Black, VMware and the entire cybersecurity industry,” said Patrick Morley, CEO, Carbon Black, in the announcement. “We now have the opportunity to seamlessly integrate Carbon Black’s cloud-native endpoint protection platform into all of VMware’s control points. This type of bold move is exactly what the IT and security industries have been looking to see for a very long time. We look forward to working with the VMware team to continue delivering a modern security cloud platform to customers around the world. Additionally, we’re pleased that today’s transaction provides Carbon Black’s shareholders with immediate and substantial value.

The acquisition of Pivotal, which was originally incubated at VMware and EMC Corporation, brings a new developer platform into VMware that makes it easier for developers to write, test and deploy their applications. It’s a smart move that helps VMware complete its story, which has typically focused on providing infrastructure over actual development tools.

As Kubernetes is emerging as the de facto standard for multi-cloud modern apps. We are excited to combine Pivotal’s development platform, tools and services with VMware’s infrastructure capabilities to deliver a comprehensive Kubernetes portfolio to build, run and manage modern applications,” said Gelsinger. “Importantly, adding Pivotal to our platform accelerates our broader Any Cloud, Any App, Any Device vision and reinforces our leadership position in modern multi-cloud IT infrastructure.”

The endpoint security marketplace is crowded, and Carbon Black competes heavily with rivals such as Crowdstrike, Cylance, Fortinet and Symantec. The space has been ripe for consolidation in recent years, particularly from traditional hardware companies. Carbon Black’s CEO, Patrick Morley, will run a security business unit that VMware is forming, and VMware will move some existing assets into it, Gelsinger said.

He said VMware has been developing a thesis that infrastructure and applications should be secure by default and shouldn’t need extra treatment by a security team. Breaches are happening to VMware’s customers even after they have deployed security products, Gelsinger said. “It ain’t working,” he said.

Interestingly, Dell has the majority stockholder of both Pivotal and VMware, and both VMware and DellEMC contributed assets to Pivotal when it was formed in 2013. VMware is paying $800 million in cash for Pivotal, and Dell will now own 81.09% of VMware as a result of the deal. However, Gelsinger said the Pivotal deal isn’t part of some plan to make VMware a wholly owned subsidiary of Dell. Dell is extraordinarily supportive of an independent VMware,” Gelsinger said.