Palo Alto based VMware, a major provider of virtualization and cloud services, today announced that it will pay out more than $1.5 billion to acquire Atlanta-based AirWatch, one of the largest providers of enterprise mobile management products with more than 10,000 customers and 1,600 employees.

Of the $1.54 billion, VMware will pay $1.175 billion in cash and approximately $365 million of installment payments and assumed unvested equity.  VMware will use the acquisition to expand its End-User Computing group, since it sees AirWatch’s offerings as complementary to those of VMware.

After the acquisition closes, the AirWatch team will continue to report to founder and CEO John Marshall (pictured at left) as part of VMware’s End-User Computing group led by Sanjay Poonen, the group’s EVP and GM.  Alan Dabbiere, AirWatch’s co-founder and chairman, will be overseeing a new AirWatch operating board which will report to VMware CEO Pat Gelsinger.  VMware plans to further expand AirWatch’s Atlanta headquarters, which will be the center of VMware’s mobile operations.

VMWare AirWatch MDM“The synergy between VMware’s End User Computing portfolio and AirWatch’s portfolio is undeniable,” said VMware’s  Sanjay Poonen in a blog post. “AirWatch delivers proven solutions… for everything from mobile device management, mobile application management, a full containerization solution for toggling between individual and corporate data, secure e-mail, productivity apps and web browsing, as well as mobile content management for enterprise file sync and share.  Areas like telecom expense management are in the works.”

AirWatch recently added “AirWatch Inbox”, a containerized email feature to its Mobile Email Management BYOD (bring your own device) suite, and also announced simple new applications to help teachers manage students’ devices in class.  The company has won numerous Mobile Star Awards from MobileVillage readers over the years, most recently in 2011 and 2013.

The acquisition has been approved by the boards of directors of both VMware and AirWatch and is expected to close during late Q1 2014, subject to the usual regulatory approvals and closing conditions.  VMware says it will fund the acquisition through a combination of balance sheet cash and proceeds from approximately $1B of additional debt to be provided by EMC.  VMware says it will also continue with its ongoing share buyback program.

VMware (NYSE: VMW) today also announced preliminary financial results for the fourth quarter of 2013.  Revenues for the quarter are expected to be $1.48 billion, an increase of 15 percent from the fourth quarter of 2012.