VMware invests in cloud and IT infrastructure

analysis
May 28, 20092 mins

One can only wonder how VMware's $20 million investment in Terremark will affect other companies in similar businesses and with similar goals, and what the responses will be from Citrix and Microsoft

Terremark may not be on your virtualization radar screen, but it was on VMware’s.  The virtualization giant has invested $20 million into the company, a move that puts VMware’s view of the future on notice for everyone.

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VMware paid $5 a share, and received 4 million shares in Terremark, one of the company’s top infrastructure service providers.  Specializing in managed hosting and offering co-location services, Terremark is helping to push VMware’s enterprise cloud initiative by combining VMware’s hypervisor and vSphere technologies with their own proprietary DigitalOps service management platform.  Terremark operates across the globe, with datacenters in the United States, Europe, and Latin America.

For some, this announcement may not come as much of a surprise.  The two companies have been working closely together for many years now.  And very recently Terremark was singled out amongst other VMware partners as a “service provider of the year” at a recent partner conference.  Terremark CEO Manuel Medina said in a press release that the VMware investment in his company was an indication of the confidence VMware has in Terremark, and that he was proud to have such a strong show of support from their long-term strategic partner.

Terremark’s revenues were also on display recently.  The company said that for the fourth quarter, revenue was up 21 percent to $68.9 million.  Net income for the quarter ending March 31 was $3.5 million, or 6 cents a share, up from a loss of $2.6 million, or 5 cents a share, the year before.  And although revenue fell short of the $74.2 million analysts expected, the company beat the consensus for net income; analysts were expecting a penny a share.  Revenue for the full year was $250.5 million, up from $187.4 million in the previous year.

And perhaps because of this new investment from VMware, the company has a positive outlook into 2010.  For the first quarter of fiscal year 2010, Terremark said it expects revenue from $63 million to $66 million.  And for the full fiscal year, the company is projecting revenue between $290 million and $300 million.

While this new investment is certainly a show of support for Terremark and what they can provide to help VMware accomplish their vCloud initiative, one can only wonder how this invested friendship will affect other companies in similar businesses and with similar goals, such as Terremark competitor SunGard.  And what, if any, will the responses be from Citrix and Microsoft?