
VMware Acquires Carbon Black for $2.1B and Pivotal for $2.7B - frostmatthew
https://techcrunch.com/2019/08/22/vmware-acquires-carbon-black-for-2-1b-and-pivotal-for-2-7-billion/
======
anarazel
The whole Dell related ownership structure is just ... odd.

    
    
        Under the terms of the transaction, Pivotal's Class A common
        stockholders will receive $15.00 per share cash for each
        share held, and Pivotal's Class B common stockholder, Dell
        Technologies, will receive approximately 7.2 million shares
        of VMware Class B common stock, at an exchange ratio of
        0.0550 shares of VMware Class B common stock for each share
        of Pivotal Class B common stock. This transaction, in
        aggregate, results in an expected net cash payout for VMware
        of $0.8 billion. The impact of equity issued to Dell
        Technologies would increase its ownership stake in VMware by
        approximately 0.34 percentage points to 81.09% based on the
        shares currently outstanding. VMware currently holds 15
        percent of fully-diluted outstanding shares of Pivotal. The
        transaction is expected to be funded through cash on the
        balance sheet, accessing short-term borrowing capacity, and
        approximately 7.2 million shares of VMware Class B common
        stock to Dell.

~~~
xigency
For mobile:

> Under the terms of the transaction, Pivotal's Class A common stockholders
> will receive $15.00 per share cash for each share held, and Pivotal's Class
> B common stockholder, Dell Technologies, will receive approximately 7.2
> million shares of VMware Class B common stock, at an exchange ratio of
> 0.0550 shares of VMware Class B common stock for each share of Pivotal Class
> B common stock. This transaction, in aggregate, results in an expected net
> cash payout for VMware of $0.8 billion. The impact of equity issued to Dell
> Technologies would increase its ownership stake in VMware by approximately
> 0.34 percentage points to 81.09% based on the shares currently outstanding.
> VMware currently holds 15 percent of fully-diluted outstanding shares of
> Pivotal. The transaction is expected to be funded through cash on the
> balance sheet, accessing short-term borrowing capacity, and approximately
> 7.2 million shares of VMware Class B common stock to Dell.

~~~
tru3_power
Can anyone here chime in and explain what the purpose is of this?

~~~
y2kenny
The fixed line break probably make reading difficult on a small, narrow,
variable width screen such as mobile.

~~~
mcnichol
The 21st century equivalent of "Who's on First"

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seabrookmx
Isn't this more of a consolidation? My understanding was that Pivotal was spun
out of EMC and included some assets that were formerly under VMWare. Also Dell
Technologies owns a majority stake in both of them.

~~~
jacques_chester
Pivotal was spun out of EMC and VMware.

From EMC came Pivotal Labs, Greenplum and I think GemFire. From VMware came
Spring and Cloud Foundry. Not sure which one RabbitMQ came from.

Disclosure: I work for Pivotal.

~~~
epsilon_greedy
GemFire came from VMware. Spring purchased[1] GemStone (which owned gemfire)
while they were a division of VMware. RabbitMQ also came from VMware by way of
Spring[2].

[1] [https://spring.io/blog/2010/05/06/springsource-to-acquire-
ge...](https://spring.io/blog/2010/05/06/springsource-to-acquire-gemstone-
data-management)

[2]
[https://web.archive.org/web/20100418132113/http://www.rabbit...](https://web.archive.org/web/20100418132113/http://www.rabbitmq.com/news.html)

~~~
jacques_chester
I didn't know that! An interesting history.

------
boynamedsue
Checkout Carbon Black’s stock today before the announcement. It was way up,
well before the news became public ....

~~~
jliptzin
Are you surprised that insider trading is occurring or just that it is
blatantly obvious in this specific instance? This kind of thing happens
regularly by all sorts of players. That's part of the reason retail investors
should just buy an index fund, they can't expect to win against professionals
engaging in insider trading all the time. SEC enforcement of insider trading
was 51 in all of 2018. 51, out of probably millions of instances.

[https://www.cov.com/en/news-and-
insights/insights/2018/11/se...](https://www.cov.com/en/news-and-
insights/insights/2018/11/sec-enforcement-activity-in-2018)

~~~
dehrmann
Quick anecdote: I was in a bar in NYC and overheard an i-banker running his
mouth about an M&A deal he was working on. The deal closed a month or two
later.

~~~
pmikesell
Good point - this was information leakage that, even if you had traded on it -
would not be insider trading.

~~~
lucb1e
So basically you're not allowed to trade with foreknowledge, it has to be a
lottery?

Stocks always seemed like legal gambling to me. If you can't predict it and
you can't use any edge that others don't know about, then doing anything but
using index funds is gambling, or am I missing something?

~~~
anonu
Read Matt Lewis and his writings on insider trading. As he would say: Insider
trading is about theft. If you pickup a dollar bill on the ground, could you
be accused of theft? Probably not...

Also:
[https://en.wikipedia.org/wiki/Mosaic_theory_(investments)](https://en.wikipedia.org/wiki/Mosaic_theory_\(investments\)).
So you can get an edge by sourcing information from various places and piecing
it together better than anyone else... that's fine as well.

~~~
chimeracoder
I think you mean Matt Levine, not Matt Lewis. Matt Levine has written about
how insider trading is really about theft, not fairness:
[https://www.bloomberg.com/opinion/articles/2015-10-05/justic...](https://www.bloomberg.com/opinion/articles/2015-10-05/justices-
aren-t-interested-in-insider-trading-case)

> If you pickup a dollar bill on the ground, could you be accused of theft?
> Probably not...

Depends on the country - in some countries, yes, that is actually considered
theft.

~~~
anonu
Yes - Matt Levine!

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the_common_man
I have never heard of Carbon black... While researching this I also found that
VMWare acquired heptio for 550m !? Wow. Isn't pivotal a massive company? It's
value is just 4 times that of a 2 year startup?

~~~
kcb
Carbon Black makes great malware that causes your brand new work computer to
feel like its 1999.

~~~
techwizrd
Yup. You cannot get malware or run non-whitelisted programs if Carbon Black
brings your computer to a grinding halt and eats all your battery.

~~~
downrightmike
Corporate policy: also install CB on all VMs running too. CB inception.

~~~
iwantagrinder
Do not take your security team for granted. They're already doing more than
most, sadly.

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craigsmansion
Maybe VMware should have used that money to develop their own kernel instead
of violating Linux' GPL licensing.

But it's probably cheaper still to buy that off with a juicy "Platinum Member"
seat at the Linux Foundation.

~~~
jabedude
They have developed their own kernel, it's called vmkernel.

~~~
monocasa
And it links in GPLed drivers from the Linux kernel.

~~~
rrdharan
The lawsuit was withdrawn; VMware is no longer using GPLed drivers.

No precedent was established as to whether their prior use actually was a
derivative work - personally I've always shared the VMware take on it that
this was a loophole, and that if the VMkernel was a derivative work of Linux
by virtue of the vmklinux compatibility layer, then Windows becomes a
derivative work of any open source driver, which doesn't make any sense...

~~~
kijiki
The official VMware take, at least while we were there, was that the vmkernel
itself was a binary only kernel module loaded by the Console OS's Linux
kernel, and as such was no different than the binary-only Nvidia driver. This
was a bit sketchy, since the vmkernel linked in a different version of the
GPL'd drivers in question than the ones in the Console OS, but you know, close
enough.

Of course, when ESXi shipped without a console OS, but with a vmklinux and
GPL'd drivers, a new take was needed.

~~~
rrdharan
> the vmkernel linked in a different version of the GPL'd drivers in question
> than the ones in the Console OS, but you know, close enough.

It wasn't "close enough" \- they released the drivers/patches/modifications of
those drivers, per the terms of the GPL.

IIRC they also avoided at least one network driver (I believe Alan Cox's 3com
driver?) because the author had strong personal objections, and 3com actually
wrote an alternative.

They also open-sourced the vmklinux API/wrapper layer itself, so the full
picture pre-ESXi was:

vmklinux module - GPL'ed module for a proprietary VMkernel

vmklinux-based drivers - GPL'ed forks of drivers from the Linux source tree

console OS - GPL/open-sourced light fork of RHEL

VMkernel - proprietary, closed source (later available under shared source w/
NDA)

Hellwig's lawsuit AIUI argued that there was significant implementation,
covered by copyright, in vmklinux headers and elsewhere, such that the
vmklinux<->VMkernel boundary was not sufficient to prevent the latter from
being a derived work of the former.

I also think that beyond that there was a strong belief and assumption in the
Linux community that other parts of the VMkernel "must have" been copied from
OSS/Linux as there was simply no way a random/small/private company could have
possibly created its own file system, scheduler, network and disk stack, etc.

But the reality was simply that VMware had a ton of really talented and highly
productive operating system experts in the early days.

[I was an employee at VMware from 2002-2011, opinions my own]

------
hodgesrm
I'm not surprised at the Pivotal acquisition. VMware is determined to succeed
at Kubernetes. There is already a lot of integration with Pivotal's Kubernetes
distribution both at a technical as well as a business level.

~~~
brown9-2
Who uses the Pivotal distribution of Kubernetes? Why?

~~~
IanGabes
My team and i tried leveraging different pivotal products as part of a test
deployment of our current esxi managed vm deployment imagined through the
pivotal kubernetes deploy.

We found that Pivotal's kubernetes makes it easy to run kubernetes on top of
existing vmware infrastructure, so our ops team could continue to manage their
normal vmware stack, with an admin interface to manage kubernetes clusters
that live within esxi. They could provision us devs with a cluster for a
specific use, and hand us the keys to do the rest.

It was pretty cool, except for the fact that we discovered kernel
incompatibility with the underlying esxi version/os that brought down the
entire deployment repeatedly a few days before the event where we intended to
stress test the product.

The use case is definitely there for larger orgs who want to share hardware,
but you also get the "on prem cloud" quick wins. Our experiment obviously
failed in a low risk way, but i think the idea is sound.

~~~
tyingq
For me, "on prem cloud" always sounds like buying a car and renting it back to
yourself.

~~~
IanGabes
We need to coin a new phrase then : )

Here i am just referring to the ease of using iaas offerings like s3 buckets
but through on prem hardware. Devs build against drop in blob storage apis as
if we lived in aws, and my ops guys still manage the backing vms.

~~~
jasonjayr
On prem cloud == "Fog"

"Like a cloud but closer to you" :)

------
abalone
Uh, PVTL's market cap is $3.73B. Isn't that one hell of a discount? Wouldn't
shareholders sue? Can someone explain this please? I feel dumb.

~~~
parasubvert
PVTL's public shareholders will be getting a premium price per share at $15.
Michael Dell holds the vast majority of shares and will instead be getting
VMware stock for Pivotal stock.

------
arithma
Very tangential question that hit me while reading the comments: Is the
current scenario possible: company A owns 10% of company B, and company B owns
10% of company A. Does that mean getting the valuation of both companies
require solving algebra? Or is this outright prevented by other methods, like
the board of A owns most of A and 10% of B?

~~~
mruts
There’s no reason why such a structure shouldn’t exist. I believe this how a
lot of Japanese conglomerates are structured: different companies structured
around a central company bank with each company owning a piece of all the
others.

~~~
lloeki
Nissan and Renault have this structure (43% and 15% respectively)

[https://en.m.wikipedia.org/wiki/Renault–Nissan–Mitsubishi_Al...](https://en.m.wikipedia.org/wiki/Renault–Nissan–Mitsubishi_Alliance)

------
c-smile
I have a question in regards of this.

If company A owns/purchased license for a product issued by company C.

The license clearly states:

"Licensee may not resell, rent, lease … the Source Code or any part of it … "

And now company A gets sold to company B.

What should happen in this case with the License? Whom the License belongs
now? Shall it be revoked or what?

How to deal with such situations in practice?

~~~
PersonalOps
I asked the same thing a few years back. A lawyer friend of mine (not legal
advice) said the company with the license does not need to transfer it since
it's still used within the same customer: the company. The only difference is
the definition of the company changed to include far more branches of
employees, IP, and more.

Think about name changes for humans. You don't have to re-sign all of your
contracts and potentially pay penalties for breaking and re-entering contracts
in doing so. It is understood that you're still the same person but going by
another identifier. Same here. Same company, another identifier.

~~~
c-smile
Thanks, but the text of the license also states "All Source Code provided with
Software... must be protected"

Yet particular license type is dependent on size of organization. A+B entity
is clearly not the same as just entity B so something needs to be done in
regards of this, no?

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nscalf
This is the first acquisition I have had stocks for, where can I learn more
about what happens for me?

~~~
ak217
I don't know of any resources for this, though I'm sure there are some good
pages on this that are googlable. Here is my experience, having owned a few
tiny positions in stocks that went through a merger.

\- The moment the merger terms became public, your stock got the merger priced
in by the market makers - minus a small discount representing the chance that
the merger won't go through. Now it's going to trade mostly pegged to the
parent stock, as if the merger had already happened (or flatline, if the
buyout was all in cash). To keep shareholders happy, mergers usually happen at
a 20-50% bonus over the purchased company's stock price, so this is a great
event for you - the parent company just boosted your position.

\- Your broker will automatically execute the merger transaction for you. The
stock will disappear from your account, and a commensurate amount of cash
and/or parent company stock will re-appear. This should show up under
"Corporate actions" in your brokerage account or similar.

\- I'm not aware of anything special that will happen otherwise. The merger
closing (usually in 6 months or so) will represent the removal of uncertainty,
which will give your position a bump, but that bump is usually tiny. So you
can sell if you have reason to believe the deal won't go through (watch out
for short term cap gains), or hold, if you like the parent company.

~~~
nscalf
This was really helpful, thank you! As far as short term capital gains, the
stock recently cut in half due to an awful quarter—-I think with the bump from
this news I’m still down 20%. But it’s okay, glad to have recouped some
losses.

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vmh1928
In this interview, Pivotal CEO Rob Mee talks about the challenges with
managing the adoption of Kubernetes.

[https://www.theregister.co.uk/2019/07/29/pivotal_ceo_intervi...](https://www.theregister.co.uk/2019/07/29/pivotal_ceo_interview/)

------
Blackstone4
It’ll be interesting to see how things pan out regarding k8 whether companies
will host it on VMs or bare metal. I guess VMWare are hoping to still be in
the mix else k8 has the potential to completely erode their vsphere business.

~~~
AlexB138
> ... how things pan out regarding k8

I've been seeing this mistake a lot. Just to clear up confusion for people:
K8s is not plural. It's a shortening convention (similar to i18n) where you
trim the middle letters out of a long word and replace it with the number of
characters you've trimmed. K(ubernete)s = K8s because "ubernete" is 8
characters. K8 is never the correct word to refer to it.

~~~
9nGQluzmnq3M
That's right: you should bark out "K9" instead.

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lgats
Form SC :
[https://sec.report/Document/0001193125-19-226906/](https://sec.report/Document/0001193125-19-226906/)

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badrabbit
Maybe Carbonblack can compete with Crowdstrike a bit more now with vmware
backing them?

~~~
jjirsa
When I think of business agility and ability to keep up with a fast moving
industry, I think Dell/VMWare.

~~~
badrabbit
Hey,I didn't know VMWare had a bad rep. Someone else also made a similar
sarcastic comment.

Even if it was Oracle or IBM, big money solves some problems.

~~~
jjirsa
Oracle and IBM are better known for killing things they acquire than enhancing
them. The money doesn't outweigh the executive overhead.

And it's not that vmware is bad, it's that they're big, enterprise'y, and
slow. They'll make their money selling VM management software to companies
that can't adapt to the cloud. But that's what they do - they make their money
selling software to companies that can't adapt.

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notus
For reference Cylance was acquired for $1.4B by trashberry

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pfarnsworth
[deleted]

~~~
downrightmike
Works well for Michael Dell.

