VMware walks away from Virtustream venture with EMC

VMware has backed out of its planned Virtustream cloud joint venture with parent company EMC, the virtualisation giant revealed today.

In a statement to the US Securities and Exchange Commission, CFO Jonathan Chadwick said only that the company would not be participating in the formation of the cloud services business that VMware and EMC had launched in late October. 

The 50:50 joint venture was announced eight days after Dell's proposal to acquire EMC - and its controlling stake in VMware - was revealed.

The pair had planned to take the Virtustream business that EMC bought for US$1.2 billion, add some of VMware's relevant cloud computing products and services, and spin the business out into a new company.

But after watching stock prices plummet in the month after the buyout deal was announced, EMC and VMware shareholders made a list of demands intended to stop the freefall - including that the pair unwind Virtustream.

The joint venture was blamed for contributing to VMware's 25 percent share price decline since October.

Virtustream was expected to record a US$200 million to US$300 million loss in 2016.

VMware and EMC will now need to come up with a new plan to compete with cloud computing vendors like Amazon, Google, and Microsoft. 

VMware said it would provide updated guidance when it announces its full-year results in January 2016.