On Monday, private equity powerhouse KKR said it has offered $4 billion to buy the End User Computing business whole, keeping its highly regarded leader as well as it staff, in a move that was embraced by VMware resellers.
Joshua Lee, CTO at VirtuIT, a New York-based VMware by Broadcom partner said he is glad EUC found a home. Lee's business has built a sizable practice selling VDI solutions and hoped to keep EUC in the rotation.
"We use this product internally and do a lot of VMware EUC business with our customers but that has almost stopped completely since the Broadcom announcement came that they were looking for a buyer. We have also started looking at Azure Virtual Desktop as an alternative for customers concerned with the unknowns of VMware EUC."
Lee said there are really only a few simple asks that partners have for the next owner of EUC.
"Biggest thing is just clear communication on deal registrations, licensing options, and roadmaps," he said.
Meanwhile, Jed Ayres, CEO of ControlUp, a leader in the digital employee experience software market, said he sees KKR bringing much-needed investment, leadership and vision to the VMware EUC business.
"The paralysis that had overtaken the VMware EUC business is gone," he said. "KKR is going to provide innovation, investment, leadership, vision and stability. KKR is going to be a stabilizing force for this business. This is a great thing for the VDI industry,"
Ayers said KKR is promising an "expanded dedicated sales team" and additional "resourcing" for partner support. The deal could signal a return to the once strong VMware EUC partner program.
Word of the deal leaked last week as insiders in the VDI channel heard rumblings that it could get announced in early March. KKR announced the deal on Monday.
KKR Promising To Expand R&D And Invest In Employees
KKR is promising to expand R&D, pursue new strategic partnerships and invest in employee ownership.
Partners said the increased investment is a big boost to the strong VDI technology stack which includes Horizon, a desktop and application virtualization platform; and Workspace ONE, a marquee Unified Endpoint Management platform for the enterprise.
Besides the increased R&D, the EUC Division will now have access to KKR's broad-based employee ownership program, which makes all employees owners in their respective businesses alongside KKR.
"This strategy is based on the belief that employee engagement and a strong ownership culture are key drivers in building stronger companies," KKR said in a statement.
Since 2011, KKR portfolio companies have awarded billions of dollars of total equity value to over 60,000 non-senior management employees across more than 40 portfolio companies, the company said.
Terms Of The Deal
KKR is buying Broadcom's VMware End-User Computing Division for $4 billion.
The deal is expected to close in 2024 subject to regulatory approvals and customary closing conditions.
KKR said the EUC Division will become a standalone company with what it called "greater access to growth capital" and a "dedicated strategic focus" on providing customers and partners "innovative digital workspace solutions."
The EUC Division technology stack includes Horizon, a leading desktop and application virtualization platform; and WorkSpace One, a unified endpoint management platform.
A Return To The Halcyon Innovation Days?
Partners are hoping the KKR acquisition could spark a resurgence of the innovation that was part and parcel of VMware's EUC business under former Executive Vice President and General Manager Sanjay Poonen.
Poonen, who left VMware in 2021 and became CEO of Cohesity in 2022, is widely credited with making VMware a powerhouse in the desktop virtualization and device management market.
During his tenure, Poonen built the EUC business from $300 million to over $1.5 billion during his tenure, according to his LinkedIn profile.
Among his accomplishments was the acquisition of Airwatch, a leader in managing devices and applications across mobile devices and desktops, for $1.17 billion in cash.
New investment comes in sharp contrast to Citrix job cuts
The acquisition marks a bright spot for the VDI EUC market as a whole given the layoffs that have taken place at VMware EUC competitor Citrix.
Citrix Systems was acquired in 2022 and taken private in an all-cash deal valued at $16.5 billion Vista Equity Partners and Evergreen Coast Capital. At the time, Citrix had annual revenues of $3.22 billion.
Since that acquisition, Citrix laid off 15% of the workforce in January 2023 and 12% of the workforce in January 2024.
Jed Ayres, CEO of ControlUp, a leader in the digital employee experience software market, said he sees the KKR investment as a big positive for the overall EUC market.
"This could be a pivotal moment for VMware (EUC) partners," he said. "It's also great for the whole EUC community. There have been a lot of layoffs and this could put hundreds of people back to work."
Existing Management Team Remains In Place
As a standalone company, the EUC Division will continue to be run by its existing management team led by Shankar Iyer, who was senior vice president and general manager, End-User Computing Division, under Broadcom.
"Today marks a huge milestone for End-User Computing as well as the beginning of our new journey," said Iyer in a LinkedIn post. "Looking forward to this chapter, in partnership with KKR in short order."
Iyer, a 10-year VMware EUC veteran, joined VMware after two years and seven months as vice president of products and strategy for the enterprise mobility business at VMware EUC rival Citrix. In that job, he led Citrix end user compute strategy and led a 150 member plus engineering team. Before that, he was vice president of products and engineering for Cisco's Webex cloud applications group.
"We are confident that this pending transaction marks an exciting next chapter for the EUC Division and one that will create enormous opportunities and benefits for our customers, partners and employees," said Iyer in a prepared statement. "The KKR team knows our industry well and is the ideal strategic partner to help us become a standalone company with an exclusive focus on delivering powerful tools for the digital workspace."
Bradley Brown, managing director at KKR, said in a prepared statement that KKR sees "great potential to grow the EUC Division by empowering this talented team and investing in product innovation, delivering excellence for customers and building strategic partnerships."
This article first appeared on CRN.
