We've covered privately held and Atlanta-based AirWatch for some time - not as long as some others in the mobile security space, but long enough to have spent quality time with the company. CEO and co-founder John Marshall is an interesting guy, and for us he's always left us with a sense of AirWatch being an acquisition-minded sort of company - but more importantly, one that would be able to handle M&A efforts on its own good terms.
And so it has now come to pass.
From fairly humble beginnings not more than four years ago (the company was founded in 2003 but when it was still a real startup in 2010), the company has made enormously successful strides to position itself first as a key mobile device management (MDM) player, and has since managed to begin morphing itself into a larger and well-financed enterprise mobile management (EMM) company that is able to fully embrace most of the issues that surround BYOD within the enterprise - from mobile devices to mobile apps to mobile-accessed data.
Furthermore, AirWatch has always been a cloud-focused vendor. It has made MDM and EMM ease of deployment and ease of use for both small and very large businesses a central theme of its existence and the company has done enormously well with this formula. How successful? Analyst Brian Marshall believes that "AirWatch revenue last year may have been in the $125 to $150 million range." That strikes us as accurate. AirWatch now has more than 10,000 customers in 150 countries and 1,600 employees on a global basis.
So given the M&A vibe it has always exhibited to us, it is certainly no surprise to hear that virtualization vendor VMWare (we know, it's more than a virtualization vendor…it’s a "cloud computing" company) has stepped to the plate and will be acquiring AirWatch. To us it looks like a perfect match and we can anticipate that there will be solid synergies between the two companies.
VMware says it will acquire AirWatch for about $1.18 billion in cash. The deal further includes about $365 million in installment payments and assumed unvested equity. That would push the total deal value to $1.54 billion. That is a very tidy sum and it should leave both Marshall and its chairman and other co-founder Alan Dabbiere sitting pretty, as the saying goes. Dabbiere will report directly to VMWare CEO Pat Gelsinger.
Dabbiere has long spoken of major consolidation within the MDM and EMM markets. During a conversation we had with Dabbiere several years ago he noted to us at that time that he expected a good deal of consolidation, suggesting the market was already crowded with too many small vendors, and he predicted it would start with Symantec.
Several months later that is exactly how it panned out when Symantec acquired Odyssey Software. More recently Citrix acquired Zenprise. That leaves us now with MobileIron as the one key independent larger EMM vendor. There are others who play in the space, such as Boxtone, but we'll leave a fuller market analysis of the remaining vendors for another day.
VMware says AirWatch will become part of VMware’s end-user computing group. The company expects the acquisition will significantly boost its mobile computing offerings for businesses by adding and strengthening its ability to deliver uncompromised mobile security.
Further, AirWatch will continue to be led by John Marshall, at least in the early stages of the transition. Marshall doesn't strike us as someone who will sit for too long in a caretaker role - whether he stays for the long term or eventually moves on to do something else will be a function of how aggressively VMWare ultimately moves to integrate the AirWatch platform across its major lines of business.
The deal has already been approved by the boards of both companies and the acquisition is expected to close late in Q4 2014.
Prior to writing our take on the deal we reached out to our colleague, 451 Research Mobility Director Chris Hazelton, to ask him a few questions on the deal from his end, which are well worth considering.
Q: So Chris, what do you think are the top drivers for the M&A?
CH: The acquisition of AirWatch by VMware was driven by three things. This is a defensive move as a result of the acquisition of Fiberlink by IBM. There was a need to expand the reach of VMware Horizon Suite beyond mobile virtualization. And this is VMware doubling down on its end user computing (EUC) division. This division is now led by relatively new hire Sanjay Poonen, who oversaw the integration of Sybase into SAP.
Q: What is the key thing AirWatch brings to VMWare?
CH: The reporting structure of AirWatch's Chairman and CEO also speaks to the importance of the EMM vendor's product line to VMware. AirWatch has over 500 people in R&D, more than the total employee count of many EMM vendors, looking to build and add new features and capabilities on top of device, app, and content management. These assets will be leveraged to further build out VMware's EUC division.
Q: The independents here are clearly dwindling. What's your take?
CH: This deal now puts intense market focus on MobileIron and Good Technology, both of which have been working steadily on IPO exits. They are the last remaining large pure play EMMs - so it is very likely that a large enterprises vendor like Oracle (which may need bigger investment than Bitzer), HP or CA may realize that the time is now to invest on a large scale on EMM.
Our own thinking is in line with Chris's - there is nothing to argue with here and the insights Chris provides here are good to keep in mind.
As for ourselves, we believe it is a great and well-deserved deal for AirWatch. We could not have predicted a better exit for the company than to land with VMWare. The synergies between the two companies will prove out nicely - VMWare customers should be very happy with it. Existing AirWatch customers meanwhile will no doubt be offered all sorts of sweet deals to increase VMWare visibility.
Congrats to all on this one!
Edited by
Cassandra Tucker
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