VMware Acquires SpringSource for $420 Million

VMware, a leader in the virtualization software market, has announced that it will acquire SpringSource, maker of an open-source platform for Java developers, aiming to secure a stronger foothold in the cloud computing segment. The deal will set back VMware $362 million in cash and stock plus the assumption of $58 million in unvested stock and options. The deal will close in the third quarter.

"Today's modern computing environments are moving to an application and data-centric world powered by state of the art virtualized and cloud computing platforms," said Paul Maritz, president and chief executive officer, VMware. "The combination of SpringSource and VMware capitalizes on this shift and places us right at the intersection of the most important forces in the software market today – virtualization, modern application frameworks and cloud computing."

SpringSource is a privately held company that builds software tools to speed up Java development and cut costs. It raised $10 million in 2007 in a first round of venture capital funding and another $15 million in 2008, making for a very profitable exit for investors Benchmark Capital and Accel Partners. Considering the state of most venture capital-backed companies, the sale comes at a crucial time for investors.

SpringSource software is already used by half of the enterprise Java offerings and has a very mature open-source community around its projects. The company is also a major backer of Apache Tomcat, a Java application server, providing 95 percent of the bug fixes for the project. Its buyer plans to continue to support all of the company's projects while also hoping to maintain the community built around it.

Vmware though has even bigger plans for the five-year-old company, as most analysts believe the virtualization software maker is moving to launch a complete platform using its hypervisor, a low-level virtualization component, with SpringSource's Java framework to provide its customers with a custom platform to develop and host cloud projects similar to Google’s AppEngine or Microsoft’s Azure.