VMware Walks Away From Virtustream Joint Venture With EMC

Cloud software company VMware says it will not participate in a previously announced cloud services joint venture called Virtustream with its parent company EMC.

Shares of VMware initially rose but later fell after VMware announced the move in a one-line statement in a regulatory filing.

The decision is likely to further complicate the already complex circumstances surrounding Dell’s proposal to acquire EMC and its controlling stake in VMware in a deal worth $67 billion when it was announced on Oct. 12.

Eight days after that deal was announced, EMC and VMware announced plans to create Virtustream as a 50-50 venture. The Virtustream announcement has been blamed for contributing to a 25 percent decline in the value of VMware shares during the last two months. Dell and its investor Silver Lake have proposed using tracking shares linked to VMware — of which EMC is a majority owner — to help pay for acquisition. The decline in VMware shares has reduced the hypothetical value of the proposed tracking stock.

The move to create Virtustream also proved unpopular with EMC and VMware shareholders, who have lobbied for an unwinding of the venture, arguing that it appeared to be a “dumping ground” for money-losing assets.

VMware shares fell 25 cents to $58.80 by mid-morning Monday.

This article originally appeared on Recode.net.

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