VMware said won’t proceed with a joint venture wherein it would take over EMC Corp.’s cloud service Virtustream, the Wall Street Journal reported.
The joint venture would have combined VMware and Virtustream’s cloud services. EMC bought Virtustream in May.
When the cloud plan was announced in October, it caused VMware’s shares to drop sharply.
The joint venture was announced shortly after Dell disclosed a deal to buy EMC, which owns approximately 80% of VMware. When it was announced, VMware’s chief executive at the time said combining the two companies’ cloud services would offer customers more comprehensive capabilities.
But VMware’s shares dropped nearly 20% after the plan was announced. Analysts had raised questions about the plan’s impact on VMware’s profit margins “because of increased spending on servers and data centers.” VMware declined to comment on reasons for backing out of the plan.
Daniel Ives, an analyst with FBR Capital Markets, said he agrees with VMware’s decision.
“Virtustream was just the latest in a string of frustrating moves that VMware investors have grown accustomed to over the years and is now hitting a boiling point as seen in the VMware selloff debacle over the last six weeks,” he said.