More Fodder For Dell-EMC Deal As Pivotal Buys UK-Based CloudCredo

The Dell-EMC deal has had so many moving pieces since it was announced in October, it’s hard to tell the players without a score card. This morning, Pivotal, which is jointly owned by EMC and VMware (and General Electric) announced it was buying CloudCredo, a Cloud Foundry service provider based in the UK.

The deal also includes stayUp, a log analysis company partly owned by CloudCredo and built on top of the CloudFoundry platform. Pivotal did not disclose the purchase price for the deal, but the companies will be folded into Pivotal and all 20 CloudCredo employees will be coming on board.

Let’s start with the details of the acquisition and why it matters. Pivotal is an independent firm created by EMC, VMware and GE to give these big companies a property that could provide the kind of agility it’s hard to find in large organizations with lots of management layers and slow decision making cycles. As such, Pivotal has its own agenda even though it’s owned by these three tech giants.

One of the main pieces of the Pivotal product family is Cloud Foundry, a Platform as a Service play created by VMware. CloudCredo is a Cloud Foundry shop and by purchasing this company, Pivotal gets some valuable Cloud Foundry talent, a base of operations in Europe and the CloudCredo’s customer list.

“CloudCredo has really been a thought leader in the Cloud Foundry space,” Leo Spiegel, senior vice president for corporate development and strategy at Pivotal told TechCrunch. Pivotal was attracted to the company by a combination of people, technology, their skill set around Cloud Foundry and the customer base they’ve built up, he said.

“The pool of truly elite Cloud Foundry systems talent, in other words BOSH, in Europe is limited. So is the pool of services companies with a proven track record of moving the dial on training and management in cloud native development,” James Governor, analyst and founder of RedMonk said in a statement .” He added that with CloudCredo, Pivotal is getting both.

Pivotal itself has been rumored to be going public in 2016. As you would expect Spiegel wasn’t revealing anything about that just yet. “We were absolutely designed from get-go to be an independent public company. We won’t comment on timing, but we are in no rush and EMC is not putting pressure on us,” he said.

As for the Dell-EMC deal, Spiegel wasn’t getting into that either. “I can’t really comment on the [Dell-EMC] transaction. All I can say is what we’ve been saying all along. We are owned primarily by EMC [and VMware]. They have committed to let Pivotal run independently and have been supportive of Pivotal’s mission,” he said.

About That Dell-EMC Deal

This is not a deal in isolation, of course. Since Pivotal is owned in part by EMC and VMware, it has to be viewed in the context of the $67 billion deal announced in October. Since then we have seen a slew of moving pieces.

EMC owns 80 percent of VMware, but it operates as a separately public traded company with its own stock and board of directors. The price of VMware stock has been dropping precipitously since the deal was announced from a high of $82.09 in the days before the Dell-EMC deal was announced to $56.09 when we published this morning.

Further complicating the matter, EMC and VMware announced they were spinning out Virtustream, the company EMC bought last spring for $1.2 billion and putting the new company’s financial results on VMware’s books. After stockholders took a dim view of this approach, VMware announced it was walking away from the deal last week.

Just last week, Dell added another layer of complexity when it announced SecureWorks, a company it owns, was filing an IPO.

We now have six different independent companies — Dell, EMC, VMware, Pivotal, Virtustream and SecureWorks — all involved in the Dell-EMC merger. If you’re confused, you’re probably not alone.

And just to make things a bit more interesting, the entire deal could pivot on a tax question regarding the structure of the payment Dell offered EMC shareholders. Dell has agreed to pay EMC shareholders $24.05 per share, but will pay an additional $9.10 per share in stock that tracks against the price of VMware’s stock.

Some have suggested that the tracking stock component could be a taxable event that could cost Dell an additional $9 billion in taxes. If all goes according to plan, the deal will close some time next year.

All of that aside, the CloudCredo purchase makes a ton of sense for Pivotal. It’s a company working directly in Pivotal’s sweet spot around Cloud Foundry, and it’s been designed and built using Pivotal as a model, according to Spiegel. As such, the combining of the two companies should go more smoothly than your average acquisition, and regardless of what happens with the Dell-EMC craziness, Pivotal should continue rolling along as it always has.