VMWare buying BlackBerry competitor AirWatch: The good and the bad

By Chris Umiastowski on 22 Jan 2014 02:10 pm EST
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This morning VMware announced plans to acquire BlackBerry MDM competitor AirWatch. The mostly-cash transaction is valued at $1.5 billion. For those unfamiliar with VMware, it is a publicly traded company in the virtualization infrastructure market. It’s a very large company valued at over $40 billion compared to BlackBerry’s $7 billion (Note: I’m counting the convertible stock as equity for purposes of market cap calculation).

The good news is this validates the importance of mobile device management, a core focus for BlackBerry given CEO Chen’s emphasis on this segment. According to BlackBerry, the Canadian vendor has more than 10x as many customers supported by its BES platform than the next largest dedicated EMM (enterprise mobility management) vendor. 

You could say that, all else being equal, BlackBerry should therefore be worth at least 10x what AirWatch is worth, giving the company a market cap of at least $15 billion. But things aren’t equal, so it’s not so easy to say this. First of all, BlackBerry has been fighting negative momentum over the years, so it has to turn this around. We think this is starting to happen, but it’s early days. Secondly, BlackBerry also has BBM, QNX and a device / OS business which may or may not ever turn profitable. So these extras should be valued separately when comparing a company like AirWatch to BlackBerry.

The bad part?  VMware is a giant, and we now have a company with 6x the market capitalization of BlackBerry buying a major competitor. The financial power of the competition just got bigger.

Some might argue that VMware is reacting to the need to be in the mobile market, which it really isn’t today. So VMware doesn’t have any kind of history or special knowledge in mobility, which bodes well for competitors.

Here’s what I’m hoping will happen: The VMware deal closes, and we get a bunch of AirWatch employees who used to work for a relatively small company (1,600 employees) and now feel like a number. The good ones decide it’s time to depart, and go work for BlackBerry. :)

Hey, I can always hope. Takeovers usually result in employee turnover.

Reader comments

VMWare buying BlackBerry competitor AirWatch: The good and the bad

86 Comments

BlackBerry is very undervalued is what this boils down to.. It will be interesting to see over time what happens with this purchase. A lot of companies buy other smaller companies and then do nothing with them.

This matter, and many others in recent news, show that technology is developing so fast that it is unpredictable which company will come out a winner in the near future. Youth thinks that what you have today will be around into the future; how wrong they are

Regarding mobile device management, BB has a great advantage being the current leader in secured networks and phones.
That being said, it is easier for other vendors to build on non-secured networks. For those non-critical applications, price may be the determining factor. However, once a low price competitor has a disaster, they will rapidly lose share.

This is a strategic fit. VMWare is working on Horizon hypervisor for for Android and iOS to provide separate work space and isolate data.

Think VM running on your cell phone with a standardized work space. BYOD is no longer an issue because you can just have staff run a work VM on their phone. Good luck trying to maintain the User Experience people are familiar with.

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But what about performance? Do the current if future ARM CPUs have specialized instructions for virtualization?

CB10 : Z10 STL100-3 10.2.0.1803

VM seems to be the one who has figured out how to place advertisement in mobile content. All those Murdoch papers online version are now centralized under VM ware. So they are growing rapidly in mobile content delivery and advertisement reaping. To have them run your MDM is like asking the fox to watch your chicken coup!

Posted via CB10 on Q10

Yeah, 3rd.

It could also be very good for BlackBerry. Look at Microsoft taking over Skype. Skype used to be dynamic and innovative. Look at them now.

Intergration can also slow down a company...

Posted via CB10 with my ultra cool Z10

This news should pump up the new management team and get them very serious to go into a good fight. It's a statement that BlackBerry correctly turned into an MDM solutions provider and a software company, WHICH happens to make mobile devices too.
It also gives them relevance and a new valuation as the number one competitor out there.

I'm so ready for a hell of a year for us.

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BlackBerry can always use people with excellent talent these days. And they have let so many people go the can swing hiring a few right?

Posted from my CB10 via the power of "Q"

The little hiring they've been doing lately one of the major areas is for BES development so yup wouldn't surprise me.

I wonder if BlackBerry would have been interested in acquiring them instead. Oh well I guess. Too late for that now. Now it's up to the boys in black to show the market that our product is better. And better it is.

Posted while peeking and flowing on my incredible BBQ10! 

Blackberry is trying to improve their cash position at this time as evidenced by the real estate selloff, so I don't see them being in the acquisition market unless it is absolutely essential to their core business. A year from now who knows.

Ya exactly waste of money "IF" BlackBerry had did that or even thought it. BlackBerry BES is the gold standard and does a way better job at MDM

I think it would be a waste to acquire Airwatch when BES does it better. BES just needs to support Windows Phone soon to be truly cross platform.

Another top-notch article, Chris.

Thank you for once again rendering clarity to a subject of which I know nothing.

Cheers. :)

I wouldn't worry about it ,so they want to buy a company that is trying to get some of BB's customers .Look at the satisfaction rating for their existing clients and it's not very good.You try and make people have 2nd thoughts about BB,in a bad way, just when things are going great,I wouldn't say they are a Major competitor,makes me wonder!!

I have no idea why VMWare would want to get into this business? I'm a VMWare customer, and love their product, but it's so far outside of what they do and provide, I just don't get why, especially because they recently sold Zimbra. If they had held on to Zimbra, I could see them rolling out a packaged, preconfigured Email/Collaboration/MDM appliance that would be easy for customers to implement, but now without that piece it doesn't make sense to me.

People said the same when John Chen was leading Synapse to the mobile world. And people were proven wrong.

Virtualization on mobile is one of the next big things. BlackBerry fans Were happy with the BlackBerry Bridge on the PlayBook but if VMWare does MDM it can be deadly for that market. Especially for BlackBerry.

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What this means is that blackberry should look to further consolidate the market the moment they are on their feet by purchasing Good or Mobile Iron or maybe both

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I use VMware products extensively. I'm not surprised they want to get into mobile. Their biggest competition is Microsoft and Citrix. Both of which see the importance of mobile. VMware is a well run company and has synergistic technology for something like Air Watch. The potential good news is VMware takes a long time to integrate their acquisitions.

QNX was a profitable company before being purchased by BlackBerry. Also, I can see ways BBM can bring value with channels and long distance calling with & without video across multiple platforms. If they add a PC client, it would be even more viable! Everyone including Skype charges for long distance calls. Channels also adds value and when it launches across other platforms, it will have a much larger audience - great content for free?

I didn't see that coming!

Although it's obvious that the big players in tech today are looking at ways to earn money from the mobile market. They either have their own product, or buy a company that has one: SAP bought Sybase, Citrix bought Zenprise, and now VMWare took over AirWatch. (and IBM bought Fiberlink in november last year, apparently. I missed that...). The only two (big) independent players left in the MDM market are Good and Mobile Iron. I predict they will end up being bought as well. The niche players are going to remain niche, or fade away entirely.

I just hope BES10 progresses enough to remain top dog in this very competitive market...

This is not even something to worry about, in the end VMware is going to destroy that company. This is not there core business, they did the same thing with Zimbra when they bought them and then had to sell them back afterwords. Them buying Zimbra held the company back and drastically slowed their progress.

CrackBerry, please remove that super annoying (hp) pop-up ad. Once I click to close it, it should stay closed even when I click on another post or return to the home page.

It will be interesting to see how this changes the mdm market. And really interested as a whole now that the stock is i over 10usd how the convertibles will convert, with BlackBerry to be a much better cash player in the market.

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Hi Chris, great article as usual. Just one point if you could please clarify "BlackBerry also has BBM, QNX and a device / OS business which may or may not ever turn profitable. "

I thought QNX was already profitable, given its traction in the automobile industry. Then is it just the enterprise business that is the only part profitable?

Thanks Chris

Catapulted from my Z10.

I was referring only to the device / OS aspect in that comment about "may or may not ever turn profitable" comment. I could have been more clear.  But I admit it, so it's OK.

I think this purchase has more to do with Citrix than Blackberry. VMware and Citrix are close competitors and Citrix have an MDM they they recently purchased too.

I would like to see BBRY buy Good. Not sure that could get by the regulators though. In my customer base, Good is killing BES.

Good will be bought by a Major company, like Apple, Google or maybe even Samsung because if it's NOC and containerization approach of EMM. MobileIron wel fade away and bleed to dead, they already had investment round until F and seeing the bodem of there treasure chest without new investors and the rumor goes they can't find any, but there is no way to check because they don't have to give insights in there financials. Also there EMM solution is the worst of them all. Just look at the Citron report that will show you just the user appreciation of there EMM client with a score of 2.9 to get a indication. AirWatch and Good scored a 3, BES10 a 3. Bye Bye MobileIron.

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last statement Key Chris and bang on , best Airwatch employees leave for the best MDM company ! Blackberry is Airwatching over Airwatch lol

Hardly anybody knows what vmware is let alone does. They have lots of money, but only nerdy IT types care, at the moment.

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It's like, the same thing as how most people do not know or care (for the most part) what QNX or Paratek, or many other 'behind the scenes' BlackBerry acquisitions are all about. So, meh.

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Yet, QNX rocks! LOL, at least it should rock. Maybe it's just like a playing cards BlackBerry is hiding.

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Chris, it may be over the heads of your target reader but I believe that it is more accurate to report enterprise value for takeovers as opposed to market cap. (Enterprise value also, correctly, limits the impact of the convertible stock as would be most important to a buyer.) In the sense of enterprise value, this acquisition is in the same order of magnitude as the deal the incompetents on BlackBerry's board were preparing to negotiate for all of BlackBerry which, as you noted, has one division that is multiples larger than AirWatch. AirWatch revenue was estimated to be $125-150 million in 2013 vs BlackBerry Services doing four times that ($632 million) in just the last quarter alone! Talk about not understanding the value of the company you are charged with overseeing!

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I agree it is more sensible to use EV  than Market Cap.  I do not agree with you about excluding converts. The converts are in the money, so they are as good as stock right now.  It doesn't matter either way though.  When you calculate EV you add in debt and you exclude excess cash.  So whether you're adding in the debt or adding in extra stock (times share price), you are absolutely not excluding the converts.

Anyway, if you prefer to look at VMware vs BBRY on an EV basis, it's about a 10:1 difference.

If you want to look at EV to compare BBRY vs AirWatch takeout valuation, then BlackBerry is about 2 and a bit times larger at the current valuation (i.e. yes, you're right in saying the proposed go private deal was only a smidgen above the EV of AirWatch in this deal)EV 

 

 

Patronising git. That's not over here most of our heads at all. Those metrics speak for themselves. ;-p.

Posted by the inimitable Z10 handheld system

BES will be spun out. Eventually. It just is going to take a real drive into the corporate base to reposition as a software / services company and not hardware.

Could losing the BlackBerry name be an option as it try's to reposition in the marketplace?

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Here’s what I’m hoping will happen: The VMWare deal closes, and we get a bunch of AirWatch employees who used to work for a relatively small company (1,600 employees) and now feel like a number. The good ones decide it’s time to depart, and go work for BlackBerry. :)

Hey, I can always hope. Takeovers usually result in employee turnover.

Chris your statement can be equally applied to Google purchase of Nest. I don't think those employees will want to leave. They just have been given keys to room full of money that will let them research, invest, and possible hire more people to expand their reach. I guess "Hey, I can always hope. Takeovers usually result in employee turnover." works as the disclaimer but this is bad new in my book.

VMware is not in R&D mode much anymore. They are in acquisition mode now. Air Watch employees will find themselves in sales and helpdesk. That's why, as Umi said, the talent will move on.

"VMware is not in R&D mode much anymore. They are in acquisition mode now. Air Watch employees will find themselves in sales and helpdesk. That's why, as Umi said, the talent will move on."

http://www.zdnet.com/vmware-buys-airwatch-for-1-54-billion-acquires-mobi...

From the link above.. "Gelsinger added that VMware plans to beef up AirWatch at a global scale."
That doesn't sound to me like they aren't going to give them resources to improve. At least that is not how I look at "beef up AirWatch." Sounds like more people, more features.

"The problem for companies like AirWatch is that the big enterprise players such as Citrix, VMware, BlackBerry and IBM were all eyeing the space and surrounding MDM with other tools. AirWatch had one of the broader mobility stacks, but needed more scale to compete with giants. ith VMware, AirWatch has distribution and a broader stack to surround its tools. VMware said that the AirWatch deal will close in the first quarter and form an mobile product group. Poonen said AirWatch will enable VMware to grow its share in mobile work and collaboration. "Mobile is the new desktop," said Poonen. "The world needs a robust mobile platform in the post-PC era. AirWatch will become the focal point for VMware's mobile strategy."

This isn't good in the least. BB has to focus before they are out of the a mobile device management business.

BlackBerry has never really competed as a straight MDM solution. BES and other BlackBerry solutions are really about end-to-end support with BlackBerry devices at the center. In other words, BlackBerry makes devices and that separates them from Airwatch by a mile. Their are security and compatibility issues introduced by mixing and matching vendors. To the extent that BlackBerry demphasizes devices or stops making devices, you'll see Airwatch and others destroy BlackBerry because BlackBerry sacrificed it's competitive advantage. The Pentagon story is about a device customer using BES. How many stories have you read about large companies without BlackBerry devices adopting BES10?

In the end, BlackBerry is much more than Airwatch, but could become much less if it doesn't make the painful investment in sales infrastructure necessary to sell devices. Chen sorta gets this... I think... well, let's hope so...

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John Chen is superb at telling analysts what they want to hear.

They say he should focus on software, so he agrees. But he's never actually said he's getting out of hardware.

BlackBerry's entire existence is based on communications, productivity, and most of all security. They eat, breath, and sleep this sh!t. Thousands of man hours spent dedicated to security cannot be duplicated by acquisitions.

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IBM bought Fiberlink (maas360.com) last December. Now there is just MobileIron and Good left. Let the games begin.

The biggest problem for any American company in the security field is the permissive belief that they do what ever the US government wants them to do. This doesn't play well and one infringes onsales.

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"They've already infiltrated."

Not really. Almost all the SAP execs John Chen has hired were with him at Sybase. Though I think one actually did the negotiation from the SAP side. If anything there's a take over by ex-Sybase (which had an office across the road from BlackBerry in Waterloo).

VMWARE purchased for 1.5 billion when projected revenue for 2014 is only 1.6billion. Not too smart really.

AirWatch supports as many platforms as Good does, and that should scare BlackBerry, really! They've never had a financial concern under Wyse - who manages desktop/laptops remotely so I wonder why this came on so strong and quick?! Did Wyse see no real value? I see VMware tearing up AirWatch and busking it as part of their VMsphere solutions since that is already in the DZ shared drive access could be incorporated.

We should be keeping a close eye on future iOS supported management API's coming up this year.

Furthermore, BES team should really look at Novell Group wise BES10 management (Domino was recently added but very late really which would've severely hurt BES10 sales and testing earlier on)!

Also BES10 team should consider Windows Phone management very soon in the next two/three releases. The faster the better - especially if Chen's main focus is to bring this into a pure software solutions company.

Co sides that big time as the next hardware is a low end device, for a smaller price range in a large consumer market (not a large corporate market) in a rough financial time, with lower profit margins for their partner at Foxconn, and it's a Touch only device which is completely against his public mention of focusing to hardware keyboard devices their corporate users love!?? Smells a bit off here on that part - I'd go with mid tier high end 9800 successor if demand was high enough or a Z30 screen and battery sized side slider spider bomb!

Waiting for  BlackBerry Q10  & Full Metal CB10!

AirWatch - which is one of the better MDM competitors for BES10 - like most companies that are bought out, will fade now the motivation to innovate has gone.

If the AirWatch founders and investors really thought they were market leaders and could grow market share they'd have hung on and sold later for more.

Your point about BlackBerry being 10 times the size is very important. That means AirWatch has an enormous potential to increase revenues were they able to compete with BlackBerry.

AirWatch CEO John Marshall last year said BlackBerry had "one foot in the grave". The fact he's sold out suggests perhaps he had over estimated his ability to compete with BlackBerry and his product isn't growing at the rate expected.

This actually could be good news for BlackBerry. Maybe BES10 is starting to make headway.

Agreed.

Whenever you hear some genius say things like "BlackBerry has one foot in the grave..." bet against that person.

Sent from my  BlackBerry Z10.

BlackBerry's strengths is the very fact AirWatch for one, has security holes. BES10 is top notch and un-matched at this time. What we can hope for is major news regarding AirWatch deficiencies, as to prop up BB10 and BES10 more.

BlackBerry is going to have to be on top of its sales force game going forward with EMM to be able to compete with companies that have more dispensable cash. Fortunately this is an area where their product really excels.

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Hopefully, BlackBerry will go after Airwatch's partner reseller network ... many of Airwatch's current partners are competing with vmware and will soon be looking elsewhere for an MDM solution to sell.

Consolidation in the mobile device and mobile app security area makes sense. IBM acquired MaaS360 (FiberLink), Citrix acquired Zenprise, Good acquired AppCentral, and now VMWare squires Air-Watch.

These are all companies who are on top of their game when it comes to managing, and securing mobile devices. Also BYOD is increasingly including laptops (Windows and Mac) so I think you can see the appeal of Air-Watch from VMWare's perspective. VMWare is excellent at BYOD on laptops, but not on smartphones and tablets. Air-Watch is excellent at BYOD on smartphones and tablets, but only a little on laptops.

Mix in that desktop/laptop usage is tending to decease as smartphone and tablet usage is increasing, you could say that VMWare is actually protecting their future.

BlackBerry's BES10 that allows for managing iOS and Android is OK but weak in comparison to Air-Watch, MobileIron, and these other market leaders. This is why I think BlackBerry is not winning the enterprise device management race. They got in very late, and with a very weak product.

Mobile device security really is the hot market right now (besides consumer mobile - although we could say that it is consumer mobile that has driven corporate mobile trends) and I think more buy-outs are coming. Who will buy MobileIron, Good, and there other players? We probably don't have to wait too long to find out.

The threat is market access. VMware has an enterprise sales team. Blackberry shed theirs. This makes them highly exposed. Time to invest in high quality enterprise sales teams to convert BES7 to BES10.

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According to my colleagues, Airwatch is full of bugs and not really on a par with BES! They all prefer BES but say that compared to UDS it's better for managing iOS and Android. Now if only Johnny Chen could perfect that part of BES 10...

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I'd like to see an article written by an industry consultant or expert which compares the products and talks about the industry outlook. Anybody got one?

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