Private equity firm KKR formally announced Monday that it plans to buy VMware’s End User Computing business in deal worth $4 billion.
Word of the deal has been rumored for days in the IT industry and the channel.
Broadcom had said it would find a new home for VMware’s End User Computing business, which cover’s VMWare’s VDI solutions, when it closed its $69 billion acquisition of VMware in November. Since then it has ordered solution providers to parse out deals for End User products separately from VMware’s other cloud products.
“Workspace ONE and Horizon are best-in-class platforms chosen by many of the world’s leading enterprises to create seamless and secure digital workspaces with interoperability across increasingly complicated technology stacks,” Bradley Brown, Managing Director at KKR said in a statement. “We see great potential to grow the EUC Division by empowering this talented team and investing in product innovation, delivering excellence for customers and building strategic partnerships.”
[RELATED: KKR Nears $3.8B Deal To Buy Broadcom’s VMware End User Compute Business: Report]ADVERTISEMENT
KKR said it is using cash from its North America Fund XIII to finance the transaction, which is expected to close later this year, subject to customary closing conditions, including regulatory approvals.
Jed Ayres, CEO of ControlUp, a leader in the digital employee experience software market, said he sees KKR bringing much needed investment, leadership and vision to the VMware EUC business.
“The paralysis that had overtaken the VMware EUC business is gone,” he said. “KKR is going to provide innovation, investment, leadership, vision and stability. KKR is going to be a stabilizing force for this business. This is a great thing for the VDI industry,”
With KKR pledging an “expanded dedicated sales team” and additional “resourcing” for partner support, the deal could signal a return to the once strong VMware EUC partner program, said Ayres.
“This could be a pivotal moment for VMware partners,” he said. “It’s also great for the whole EUC community. There have been a lot of layoffs and this could put hundreds of people back to work.”
Joshua Lee, CTO at VirtuIT, a Nanuet, N.Y.-based VMware by Broadcom partner said he is glad EUC found a home. VirtuIT has built a sizable practice selling VDI solutions and hoped to keep EUC in the rotation.
“We use this product internally and do a lot of VMware EUC business with our customers but that has almost stopped completely since the Broadcom announcement came that they were looking for a buyer. We have also started looking at Azure Virtual Desktop as an alternative for customers concerned with the unknowns of VMware EUC.”
Lee said there are really only a few simple asks that partners have for the next owner of EUC.
“Biggest thing is just clear communication on deal registrations, licensing options, and roadmaps,” he said.
Michael Servino, co-founder and CEO of CircleSquare Consulting, which has cultivated a large VDI clientbase, said he uses Microsoft AVD and Cloud PCs. CircleSquare’s vendor assessment includes provisions to steer them from buying products that could end up in the hands of private equity, when it is possible.
“We made it a point to get away from most of these older products due to this exact scenario. We do a bunch of VDI but it is all based around Microsoft AVD and Cloud PCs,” Cervino said. “Microsoft may put us in a tough spot, but I don’t have the risk of PE coming in and blowing the whole thing up.”
KKR Plans For VMware EUC
According to the KKR statement, the EUC Division will be run by its existing management team led by Shankar Iyer.
In addition to expanding R&D momentum and pursuing new strategic partnerships, KKR plans to support the EUC Division’s focus on customer relationships through investments across go-to-market functions. The standalone business will be positioned to make long-term investments in resourcing for customer success, partner support and an expanded, dedicated sales team, KKR said.
The EUC Division will now have access to KKR’s broad-based employee ownership program, which makes all employees owners in their respective businesses alongside KKR.
“This strategy is based on the belief that employee engagement and a strong ownership culture are key drivers in building stronger companies,” KKR said in the statement.
Since 2011, KKR portfolio companies have awarded billions of dollars of total equity value to over 60,000 non-senior management employees across more than 40 portfolio companies, the company said.
KKR describes itself as a “leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions.”
“KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities,” the company said.