VMWare Backs Out Of Virtustream Joint Venture With EMC

(RTTNews) - Virtualization software company VMware Inc. (VMW) said Monday it will not go ahead with the formation of a joint venture that will combine its cloud services business with that of its parent company EMC Corp. (EMC). The company did not provide any reasons for the decision.

In a regulatory filing, VMWare said it will not be participating in the formation of the Virtustream Cloud Services Business, previously announced by EMC and VMware on October 20, 2015. However, Vmware's shares have slid following the announcement of the deal, amid concerns about the impact of the deal on the company's profit margins.

VMware also said it will update the preliminary 2016 financial guidance it provided on its third-quarter earnings conference call on October 20, 2015, when it announces its fourth quarter and fiscal 2015 financial results in January 2016.

Further, VMWare announced the resignation of Pamela Craig and Dennis Powell from its board of directors and all committees thereof on December 11, with immediate effect. The company's board has elected Donald Carty as a Class III, Group II member of the Board. Carty was appointed to serve on VMware's Audit Committee.

In late October, EMC Corp and VMware said they have agreed to form a new cloud services business by combining their respective cloud capabilities, along with existing Virtustream cloud offerings, under the Virtustream brand. Virtustream would be jointly owned by VMware and EMC.

The announcement of the joint venture came after PC maker Dell Inc. agreed in early October to acquire EMC Corp. for about $67 billion in cash and stock, while maintaining VMware as a publicly-traded company.

EMC has been under shareholder pressure after activist hedge fund Elliott Management Corp. took a nearly 2 percent stake in the company last year and urged it to spin off VMware. EMC holds 80 percent of VMware, which has a market capitalization of $34 billion.

VMW closed Monday's trading at $57.25, down $1.8 or 3.05 percent on a volume of 2.88 million shares. However, in after-hours, the stock gained $0.06 or 0.10 percent to $57.31.