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What VeloCloud Cost VMware

Phil Harvey
5/21/2018
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VMware paid a lot of money, but less than you might think, for SD-WAN startup VeloCloud. The price wasn't revealed at the time the acquisition was announced, but industry analyst Scott Raynovich, the man behind research firm Futuriom, did some SEC filing sleuthing and reports that price to be $449 million.

Raynovich, in his blog today, discusses the price and the implications of the price on the SD-WAN market as a whole, especially the dozens of privately held, venture-backed firms that are seeking some kind of exit in this white hot market. With no hard numbers to go on at the time of the sale, the new SEC filings also suggest that some in the industry might've been too optimistic about VeloCloud's growth rate.

Indeed, "if VeloCloud was close to a $100 million run rate in 2017, as it indicated to some analysts, neither the acquisition price nor the customer contracts disclosed as part of the deal back that up," Raynovich writes.

Here's a quick look at VeloCloud's highlights since 2014:

  • Consolidated Communications Goes Cross-Country With VMware's VeloCloud
  • VeloCloud 'Pours Gas' on VMware's Carrier Ambitions
  • VMware to Acquire SD-WAN Startup VeloCloud
  • VeloCloud Racks Up 50 Service Provider Partners
  • VeloCloud Scores Telstra SD-WAN Win & Investment
  • Cisco Joins $27M Round for SD-WAN Startup VeloCloud
  • VeloCloud Reimagines Enterprise WAN
  • — Phil Harvey, US News Editor, Light Reading

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    Phil Harvey
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    Phil Harvey,
    User Rank: Light Sabre
    5/22/2018 | 12:42:27 PM
    Re: But it's strategic
    That's where it gets dicey, right? I mean will Dell sell enough gear, VMware enough licenses and so on to justify $450M? No idea and they wouldn't track it that way anyway. 

    It does suck to be a shareholder and just watch people go shopping with your money.
    brooks7
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    brooks7,
    User Rank: Light Sabre
    5/22/2018 | 11:49:10 AM
    Re: But it's strategic
     

    Hey, I don't know if it will be a good deal over time.  But you would have to make $450M in profit to balance the expense.  They will have to put a bunch of Goodwill on the Balance Sheet that they can write down the next time there is a blip in earnings.  It always galls me that Management Teams feel nothing about spending the shareholder's money.

    seven

     
    Phil Harvey
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    Phil Harvey,
    User Rank: Light Sabre
    5/21/2018 | 6:38:16 PM
    Re: But it's strategic
    Silly me. It was 1+1=3, right?
    Scott Raynovich
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    Scott Raynovich,
    User Rank: Light Sabre
    5/21/2018 | 6:33:31 PM
    But it's strategic
    But you guys, it's strategic ... 
    Phil Harvey
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    Phil Harvey,
    User Rank: Light Sabre
    5/21/2018 | 5:02:26 PM
    Re: Also
    I wonder if they felt like that, with Dell's enterprise clients and channel, they'd be able to do such a large volume of business over time that the price would seem more reasonable?
    brooks7
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    brooks7,
    User Rank: Light Sabre
    5/21/2018 | 4:47:39 PM
    Also
    That would indicate that they paid over 4x sales for VeloCloud.  That seems really, really high.

    seven

     
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