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VMware splashes cash on $1.54 billion AirWatch deal

VMware has splashed its cash with a $1.54 billion deal (£929 million) that it hopes will tap into the growing demand for better protection against mobile malware.

VMware sells virtualisation software that helps companies use server and storage space more efficiently with the aim of reducing IT costs. Meanwhile, Atlanta-based AirWatch has more than 10,000 customers globally that it serves with its 1,600 employees in nine offices and specialises in mobile security.

VMware has stated that it will pay up front around $1.18 billion (£712 million) for the 2003-founded company in cash, before coughing up the rest in instalment payments and assumed unvested equity.

It's a bold move, especially considering that AirWatch is the second acquisition of more than $1 billion that the software behemoth has made in the last 18 months. The last was Nicira, a startup specialising in improving the efficiency of networks.

However, the deal should help VMware cut a slice of the burgeoning market for mobile security products. Sales of smartphones and tablets are surging, and with cyber attacks on mobile devices growing rapidly more stringent measures need to be implemented to protect mobile users.

By acquiring the business, EMC Corp. owned VMware has sent its shares rocketing by three per cent in pre-market trading. The company has said it expects revenue growth of around 16-20 per cent through 2015 into 2016, which is a jump up for its previous estimates of around 15-20 per cent.

VMware also claimed its fourth-quarter adjusted revenue should rise by a cool 20 per cent to $1.48 billion (£892 million), since it will be selling more licenses to enterprise customers.

But what does the deal mean for AirWatch? According to Reuters, the company will become a unit of VMware but its customers will still continue to report to AirWatch's founder and Chief Executive, John Marshall.

VMware stated that it expects the deal will be completed late in the first quarter of 2014.