Palo Alto-based cloud software giant VMware plans to scoop up Waltham endpoint security company Carbon Black in an all-cash deal worth $2.1 billion, the companies announced Thursday.
For VMware, the acquisition is a major move into the security space. The company has been working with Carbon Black for the last two years, VMware CEO Pat Gelsinger noted on an earnings call Thursday, essentially de-risking the acquisition as the two companies paired up to build a shared go-to-market strategy.
"We really think the security industry is broken," Gelsinger said on the call. "This idea of individual products that are bolted on and patched on is just ineffective for customers. Today, we’re launching a major step to deliver an end-to-end, intrinsic security platform, and we see the Carbon Black assets as a huge accelerant and complement to our offerings to do exactly that."
Carbon Black went public just last year with a $152 million IPO. The company's origins trace back to 2002, when Bit9 was founded. Bit9 acquired Carbon Black in early 2014 and began using the combined name. By 2016, Carbon Black had gone from 12 customers to 1,100; today, it has more than 5,600 customers and 500 partners globally.
Still, analysts had questions about VMware's decision to acquire the security firm.
"I'm having a hard time with the Carbon Black acquisition," one said bluntly. "I get that Carbon Black is part of the next-gen players in corporate endpoint, but I don't think it's considered the cream of the crop."
Gelsinger defended the acquisition, attesting that he and his team were "very satisfied [with Carbon Black's] move to a cloud-delivered service and capability." And if anything, he said, Carbon Black could grow with the support of VMware; the enterprise mobility management business AirWatch wasn’t "number one" when VMware acquired it in 2014, but VMware had made it successful. (Of note: VMware is also set to acquire Pivotal, a San Francisco-based SaaS company.)
This isn't the only Boston-area acquisition VMware has made recently. In October, the California tech giant completed its acquisition of CloudHealth, valued at $500 million. The support has allowed CloudHealth, based in Downtown Boston, to go on a hiring spree. It aims to hire at least a person a day through the end of 2019.
Once the Carbon Black deal closes, the Waltham team will exist as an independent unit within VMware: VMware’s "Security Business Unit," Carbon Black president and CEO Patrick Morley wrote in a blog post.
The transaction is expected to close in the second half of VMware's 2020 fiscal year.
"As more and more of humanity puts their lives, their financials, their health on the tech platform, they’re expecting a much higher return and a much better protection fo their data and lives than the tech industry is giving," Gelsinger said. "To us, this is a much bigger cause than just building a business unit or starting a new revenue line. We’re out to change the security industry."
