Would a VMware Acquisition of Red Hat Go Anywhere?

Is there any chance that virtualization giant VMware might have its eyes on Red Hat as an acquisition? This article reports that "VMware CEO Diane Greene, ousted by her board in July, had set up meetings with Red Hat in part to position VMware as friendly to open source and possibly as a prelude to a buyout discussion, according to a person familiar with the conversations." While both companies have declined to comment, the prospect could make a lot of sense for VMware for several reasons. Here's why.

A few months ago, I wrote about Red Hat's continuing financial success with its largely support-driven model for monetizing its Linux efforts. That piece also made note of the fact that Oracle has been trying to match that success with similar efforts, but has stumbled in many ways. Meanwhile, readers wrote in and suggested that IBM and Hewlett-Packard might have their eyes on a Red Hat acquisition. Could VMware be the most logical suitor?

VMware, of course, has seen some rocky times recently. Its CEO was recently ousted, and replaced with a seasoned Microsoft executive, Paul Maritz, who knows his way around operating systems. In this item, I noted that operating systems themselves represent growing threats to VMware's virtualization business. That's because virtualization is being wrapped into operating systems as an under-the-hood feature that people expect to get for free. Both Windows Server and Sun's Solaris are offering built-in virtualization.

From my perspective, especially given Paul Maritz's background with Windows, VMware could very well be looking at Red Hat as a possible acquisition (this is speculation at this point, though). Maritz would know that what is going on with virtualization offerings is following the same path that software utilities have always followed. They end up free in the operating system. This happened with backup software, file managers, disk defraggers, and countless other utilities. Virtualization is becoming commoditized in this way--expected in the OS.

That's why VMware could benefit from an operating system to marry its virtualization tools with. Also, as BusinessWeek notes, "sales of computer servers preloaded with Linux are growing faster than the overall market for servers." A VMware acquisition of Red Hat could provide numerous opportunities to ride that trend, and might give the financial community--which has pummeled VMware--a more positive spin on the company's prospects.(Wall Street isn't being so kind to Red Hat, either.)

Red Hat's financial success with its support-driven, Linux-focused business model could be of substantial value to VMware. And, of course, Red Hat has recently entered the virtualization race, announcing its own embedded hypervisor, oVirt. Clearly, the momentum of virtualization is not lost on Red Hat.

A combination of VMware virtualization and a proven, popular operating system could pave the way for a future of healthy competition for VMware with other operating systems that bundle virtualization. I wouldn't be surprised to see both VMware and Red Hat pursue all of this.