The last time I wrote about VMware (NYSE:VMW) in December, I suggested readers consider Microsoft (NASDAQ:MSFT) instead of VMware stock. After VMware’s latest acquisition announcement, I think it’s time to reconsider my position.
The Network Edge
Before getting into what I mean by the network edge, let me fill you in on the company’s latest acquisition.
On Jan. 21, VMware announced that it had acquired Nyansa Inc., a privately-owned developer of advanced IT infrastructure analytics software, based in Palo Alto, California. Its major investors include Intel (NASDAQ:INTC), Formation 8, and Shirish Sathaye, a former general partner at Formation 8.
According to Nyansa — pronounced “knee-ans-sah” — as more users, clients, and Internet of Things devices depend on network infrastructure, the need to quickly analyze the performance of these networks to ensure better user experience while maintaining their security is critical.
To help with this need or problem, Nyansa has created Voyance, an artificial intelligence for IT operations (AIOps) platform.
“The AI-powered analytics engine analyzes every client and device transaction across the entire network, correlating data from disparate sources to pinpoint problems, detect behavior anomalies, surface root causes, and recommend next steps,” states the company’s website.
In simple terms, it makes the IT department’s job a whole lot easier.
Which brings me to the concept of the “network edge.”
The Vision Grows
By financial numbers, Nyansa pales in comparison to some of VMware’s most recent acquisitions — Pivotal Software for $2.7 billion in December 2019 and Carbon Black in October 2019 for $2.1 billion — but it makes up for its smallish size with some transformational technology.
“Voyance is a SaaS solution primarily deployed as a public cloud and also available as a private cloud. Cloud-sourcing is used to further extend the value of the product, providing massive data sets for machine learning, and the ability to benchmark performance across industry peers,” Nyansa’s website states. “By continuously monitoring millions of IoT devices, the platform enables a global view of IoT behavior, security threats and performance of similar devices.”
Voyance currently analyzes more than 20 million client devices. Customers are a who’s who of corporate America.
In January 2019, VMware detailed its vision for Network Edge, the company’s plan for software-defined wide-area networks or SD-WAN. It wanted to move beyond WAN into the local area network or LAN.
While it already had VMware SD-WAN by VeloCloud, Nyansa’s AIOps platform gives VMware clients a single platform to analyze network traffic.
“Nyansa can proactively predict client problems, optimize their network, better enable the behavior of critical IoT devices, and justify infrastructure changes based on actual user, network and application data,” stated Sanjay Uppal, VP and GM of VMware’s VeloCloud unit, in a blog post discussing the acquisition.
“Second, you will be able to use the breadth and depth of Nyansa’s data ingestion and analysis, including packet analysis and metrics via API across multi-vendor wired and wireless LAN environments.”
The Bottom Line on VMware Stock
Nyansa and VMware already had a partnership together that started in 2019. This means that in many instances, the two companies share the same customers. Moving forward, this should give VMware a real value-add with existing and potential clients.
According to Nyansa’s website, it’s received $27 million in series B funding. While financial numbers weren’t discussed, it’s safe to say that VMware paid a lot less for this acquisition than it did for either Pivotal or Carbon Black.
However, don’t be lulled into thinking this won’t move the needle on VMware’s share price. In three to five years, Nyansa could turn out to be the lynchpin of its success.
Sometimes, big things come in small packages. For this reason, I’m changing my tune.
VMware is now a buy.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.