Personal blog of Yzmir Ramirez

When Dell acquired EMC in 2016 for $67 billion, it created a complicated consortium of interconnected organizations. Some, like VMware and Pivotal, operate as completely separate companies. They have their own boards of directors, can acquire companies and are publicly traded on the stock market. Yet they work closely within Dell, partnering where it makes sense. When Pivotal’s stock price plunged recently, VMware saved the day when it bought the faltering company for $2.7 billion yesterday.

Pivotal went public last year, and sometimes struggled, but in June the wheels started to come off after a poor quarterly earnings report. The company had what MarketWatch aptly called “a train wreck of a quarter.”

How bad was it? So bad that its stock price was down 42% the day after it reported its earnings. While the quarter itself wasn’t so bad, with revenue up year over year, the guidance was another story. The company cut its 2020 revenue guidance by $40-$50 million and the guidance it gave for the upcoming 2Q 19 was also considerably lower than consensus Wall Street estimates.

The stock price plunged from a high of $21.44 on May 30th to a low of $8.30 on August 14th. The company’s market cap plunged in that same time period falling from $5.828 billion on May 30th to $2.257 billion on August 14th. That’s when VMware admitted it was thinking about buying the struggling company.

VMware today confirmed that it is in talks to acquire software development platform Pivotal Software, the service best known for commercializing the open-source Cloud Foundry platform. The proposed transaction would see VMware acquire all outstanding Pivotal Class A stock for $15 per share, a significant markup over Pivotal’s current share price (which unsurprisingly shot up right after the announcement).

Pivotal’s shares have struggled since the company’s IPO in April 2018. The company was originally spun out of EMC Corporation (now DellEMC) and VMware in 2012 to focus on Cloud Foundry, an open-source software development platform that is currently in use by the majority of Fortune 500 companies. A lot of these enterprises are working with Pivotal to support their Cloud Foundry efforts. Dell itself continues to own the majority of VMware and Pivotal, and VMware also owns an interest in Pivotal already and sells Pivotal’s services to its customers, as well. It’s a bit of an ouroboros of a transaction.

Pivotal Cloud Foundry was always the company’s main product, but it also offered additional consulting services on top of that. Despite improving its execution since going public, Pivotal still lost $31.7 million in its last financial quarter as its stock price traded at just over half of the IPO price. Indeed, the $15 per share VMware is offering is identical to Pivotal’s IPO price.

An acquisition by VMware would bring Pivotal’s journey full circle, though this is surely not the journey the Pivotal team expected. VMware is a Cloud Foundry Foundation platinum member, together with Pivotal, DellEMC, IBM, SAP and Suse, so I wouldn’t expect any major changes in VMware’s support of the overall open-source ecosystem behind Pivotal’s core platform.

It remains to be seen whether the acquisition will indeed happen, though. In a press release, VMware acknowledged the discussion between the two companies but noted that “there can be no assurance that any such agreement regarding the potential transaction will occur, and VMware does not intend to communicate further on this matter unless and until a definitive agreement is reached.” That’s the kind of sentence lawyers like to write. I would be quite surprised if this deal didn’t happen, though.

Buying Pivotal would also make sense in the grand scheme of VMware’s recent acquisitions. Earlier this year, the company acquired Bitnami, and last year it acquired Heptio, the startup founded by two of the three co-founders of the Kubernetes project, which now forms the basis of many new enterprise cloud deployments and, most recently, Pivotal Cloud Foundry.

It’s been just over a year since Microsoft bought GitHub for $7.5 billion, but the company has grown in that time, and today it announced that it has hired former Bitnami COO and co-founder Erica Brescia to be its COO.

Brescia handled COO duties at Bitnami from its founding in 2011 until it was sold to VMware last month. In a case of good timing, GitHub was looking to fill its COO role and after speaking to CEO Nat Friedman, she believed it was going to be a good fit. The GitHub mission to provide a place for developers to contribute to various projects fits in well with what she was doing at Bitnami, which provided a way to deliver software to developers in the form of packages such as containers or Kubernetes Helm charts.

New GitHub COO Erica Brescia

She sees that experience of building a company, of digging in and taking on whatever roles the situation required, translating well as she takes over as COO at a company that is growing as quickly as GitHub. “I was really shocked to see how quickly GitHub is still growing, and I think bringing that kind of founder mentality, understanding where the challenges are and working with a team to come up with solutions, is something that’s going to translate really well and help the company to successfully scale,” Brescia told TechCrunch.

She admits that it’s going to be a different kind of challenge working with a company she didn’t help build, but she sees a lot of similarities that will help her as she moves into this new position. Right after selling a company, she obviously didn’t have to take a job right away, but this one was particularly compelling to her, too much so to leave on the table.

“I think there were a number of different directions that I could have gone coming out of Bitnami, and GitHub was really exciting to me because of the scale of the opportunity and the fact that it’s so focused on developers and helping developers around the world, both open source and enterprise, collaborate on the software that really powers the world moving forward,” she said.

She says as COO at a growing company, it will fall on her to find more efficient ways to run things as the company continues to scale. “When you have a company that’s growing that quickly, there are inevitably things that probably could be done more efficiently at the scale, and so one of the first things that I plan on spending time in on is just understanding from the team is where the pain points are, and what can we do to help the organization run like a more well-oiled machine.”

VMware announced today that it’s acquiring Bitnami, the package application company that was a member of the Y Combinator Winter 2013 class. The companies didn’t share the purchase price.

With Bitnami, the company can now deliver more than 130 popular software packages in a variety of formats, such as Docker containers or virtual machine, an approach that should be attractive for VMware as it makes its transformation to be more of a cloud services company.

“Upon close, Bitnami will enable our customers to easily deploy application packages on any cloud — public or hybrid — and in the most optimal format — virtual machine (VM), containers and Kubernetes helm charts. Further, Bitnami will be able to augment our existing efforts to deliver a curated marketplace to VMware customers that offers a rich set of applications and development environments in addition to infrastructure software,” the company wrote in a blog post announcing the deal.

Per usual, Bitnami’s founders see the exit through the prism of being able to build out the platform faster with the help of a much larger company. “Joining forces with VMware means that we will be able to both double-down on the breadth and depth of our current offering and bring Bitnami to even more clouds as well as accelerating our push into the enterprise,” the founders wrote in a blog post on the company website.

Holger Mueller, an analyst at Constellation Research says the deal fits well with VMware’s overall strategy. “Enterprises want easy, fast ways to deploy packaged applications and providers like Bitnami take the complexity out of this process. So this is a key investment for VMware that wants to position itselfy not only as the trusted vendor for virtualizaton across the hybrid cloud, but also as a trusted application delivery vendor,” he said.

The company has raised a modest $1.1 million since its founding in 2011 and says that it has been profitable since early days when it took the funding. In the blog post, the company states that nothing will change for customers from their perspective.

“In a way, nothing is changing. We will continue to develop and maintain our application catalog across all the platforms we support and even expand to additional ones. Additionally, if you are a company using Bitnami in production, a lot of new opportunities just opened up.”

Time will tell whether that is the case, but it is likely that Bitnami will be able to expand its offerings as part of a larger organization like VMware. The deal is expected to close by the end of this quarter (which is fiscal Q2 2020 for VMware).

VMware is a member of the Dell federation of products and came over as part of the massive $67 billion EMC deal in 2016. The company operates independently, is sold as a separate company on the stock market and makes its own acquisitions.

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