22 January, 2014 /Woori BMO Group/ Atlanta tech industry poster-boy and IPO candidate AirWatch has cashed out, according to executive wealth managers at Woori BMO Group. Palo Alto-based VMware will purchase the Sandy Springs-based mobile device management company for $1.54 billion in cash and stock. Atlanta is going to be the headquarters for the mobile security branch of VMware.
The contract, which underscores appetite for information security technologies to deter corporate data theft, is the Atlanta tech company’s largest exit in the last few years.
AirWatch, headed by founder Alan Dabbiere, was seen as evidence that Atlanta was able to build a rapidly growing tech firm. The business is planning to add 400 jobs this year in Atlanta, after hiring about 800 in the last year.
“The buyout shows how difficult it is to take the Atlanta tech company public. Internet security company SecureWorks came within weeks of pulling it off, before eventually selling to Dell Inc. for $612 million in 2011”, said Andrew Williams, Director of Institutional Equity at Woori BMO Group.
Historically, tech firms in Atlanta have struggled to reach IPO-level. However, they have achieved sufficient financial and market growth to allow them takeover targets for deeper-pocketed rivals or strategic investors.
AirWatch’s software can allow and disable applications remotely, securely connect mobile devices to the IT system of an enterprise, and scrub out data if a device is lost or stolen. This is relevant because businesses require workers to use their cell phones for their jobs.
AirWatch can add features for handling mobile devices to VMware’s portfolio of the data centre, virtualization, and cloud services.
VMware will pay approximately $1.175 billion in cash and roughly $365 million in instalments and presumed unspent equity.
AirWatch will become VMware’s operating company and expects its domestic and international growth to continue, AirWatch CEO John Marshall said. He also declined to say that VMware wants to bring additional operations to Atlanta.
In the New Year AirWatch is expected to make a significant push in the real estate. The firm, which expanded at 1155 Perimeter Centre West this year from 100,000 square feet to nearly 200,000 square feet, will consider other office buildings in the Central Perimeter business district for potential growth, or relocation.
Several deep-pocketed players are moving into the handling space for mobile apps. Talent, infrastructure, and delivery networks from VMware should help AirWatch perform effectively.
“This market is about to hit its next growth trajectory,” said Marshall.
AirWatch, which this year was rumoured to be an IPO candidate, has recently been in acquisition mode. In November, the firm expressed interest in purchasing BlackBerry’s services division. The acquisition of the BlackBerry software unit would be strategic for AirWatch, offering a multi-platform product capable of servicing iOS, Android, and BlackBerry operating systems.
Last year AirWatch acquired the Mobility Services Platform from Motorola Solutions. That acquisition will increase the ability of AirWatch to support the rugged scanners and mobile devices used by United Parcel Service Inc. carriers and employees of the Home Depot store to manage deliveries and order and track inventories.
Despite the IPO and acquisition bluster, Airwatch was possibly a lure to take over from large enterprise software vendors, such as IBM, Dell, and SAP, pursuing market share in the white-hot infosec sector.
“AirWatch was, along with Good Technology and MobileIron, one of a handful of independent companies in the MDM space,” said Christian Harper, Director of EMEA Wealth Management at Woori BMO Group.
“We expect the VMware-AirWatch deal to kick-start a boom in space M&A activity over the next 6-12 months as the remaining mega-vendors purchase their way into this fast-growing market,” Harper added.
Insight Venture Partners and Accel Partners invested more than $200 million in venture capital into AirWatch. It is the second billion-dollar company Dabbiere launched. The founder went public with Manhattan Associates in 1998. That enterprise now has a $2.5 billion market cap.