A joint venture between VMware and Virtustream that was supposed to be part of the acquisition of EMC by Dell has been dumped.
VMware said in a regulatory filing on Monday that it won't be combine its cloud assets with Maryland-based Virtustream.
The plan was an unpopular one with VMware shareholders, with that company's shares dropping by about one-third after it was announced as part of the $67 billion acquisition of EMC by Dell.
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The problem was that VMware was supposed to assume much of the cost of Virtustream’s enterprise cloud business. It was estimated that would hit VMware's adjusted bottom line next year by between $200 million and $300 million. VMware said it will now issue new guidance for next year.
Analysts at FBR & Co. called the VMware-Virtustream joint venture "one of the more head-scratching moves we have seen recently across the tech space."
They applauded the decision to abandon it: "We are glad management/board heard the loud frustration of investors and decided to move away from this ill-timed initiative."
Virtustream was acquired earlier this year for $1.2 billion by EMC. It provides cloud computing management software, infrastructure as a service, and managed services to enterprises, governments and service providers.
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VMware, led by CEO Patrick Gelsinger, is a publicly traded company (NYSE:VMW), which EMC controls through owning more than 80 percent of its stock. It pioneered data center virtualization software and services and has been moving into cloud-based technology.
The company also said that former Accenture Chief Financial Officer Pamela J. Craig and former Cisco Systems Chief Financial Officer Dennis D. Powell resigned from its board of directors.
Donald J. Carty, the former CEO of American Airlines' parent AMR, was added to the board. He is also on EMC's board.
VMware stock was up less than 1 percent after Monday's announcement and EMC dropped by less than 1 percent.