EMC buys enterprise cloud company Virtustream for $1.6bn

Data storage maker EMC will buy privately held Virtustream for about US$1.2 billion (A$1.6 billion) in cash to expand its cloud offerings.

EMC has been looking to strengthen its cloud services offerings as it struggles with slowing sales growth in its main data storage business.

The company said Virtustream would operate as its new managed cloud services business after the transaction closes.

The move follows EMC's late 2014 acquisition of Cloudscaling, which gave it an entry into the OpenStack private cloud market.

Virtustream was founded in 2009 by CEO Rodney Rogers and chief technology officer Kevin Reid. The company's customers include Coca-Cola, Intel, Heinz and Hess.

Virtustream fields data centres in the US, UK and Netherlands, and counts SAP among its investors. It targets clients in financial services requiring PCI compliance as well as federal government.

"With the addition of Virtustream, EMC will enable customers to move their entire application portfolio into a cloud environment," EMC said.

The company said the deal, expected to close in the third quarter, was expected to add to its revenue and profit in 2016. The deal is not expected to have a material impact on EMC's 2015 results.

EMC, which reported slowing sales growth for the past two quarters, slashed its full-year revenue and profit forecasts in April.

Virtualisation software maker VMware, in which EMC holds an 80 percent stake, reported its slowest revenue growth in seven quarters in April, hurt by sluggish technology spending and a stronger dollar.

EMC has been facing pressure from activist investor Elliott Management to spin off VMware, but in February decided not to do so.

EMC's shares were up about 1 percent at US$27.04 in premarket trading on today.