To one analyst, Virtustream's value seems to be less than zero, versus the $1 billion plus paid for it earlier this year
Was once SAP acquisition candidate

Tom Paine

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A report in Friday's Wall Street Journal cites one analyst who apparently questions the economic viability of EMC's Virtustream acquisition. The Journal piece was
based upon a Reuters article.

Virtustream, founded six years ago, was seen as extremely valuable in helping to implement SAP Hana applications, so much so that SAP offered to buy the company (though there are quetions about who walked first) before it eventually sold this past summer to the so-called "EMC Federation" for $1.2 billion.

But in a research note this week, FBR & Co. analyst Daniel Ives recommends that EMC / VMware shutter (not sell) Virtustream as part of a number of steps aimed at saving the Dell / EMC deal (which naturally leads to the question, why does it need to be saved?)

One issue revolves around simple financial engineering. By keeping Virtustream under EMC, rather than folding part of it into a planned JV with VMware, EMC/Dell could prop up the value of VMware's publically traded "stub", a key to the deal.

In addition, Ives evidentially sees Virtustream as a continuing cash drain. That is partly due to a planned ramp up in expenditures related to
a broader corporate cloud strategy. VMware Chief Financial Officer Jonathan Chadwick said on a conference call on Oct. 20 that Virtustream would have an operating loss of about $200 million to $300 million in 2016.

But it leads to the further question as to whether the technology and economics of cloud architecture has changed so much in a few years that Bethesda, MD-based Virtustream may simply not have the value it was percieved to have had by some not long ago. Which may bring up that dirty word, Amazon Web Services.

If EMC, by partially following Mr. Ives' logic, were to cut its losses and offer Virtustream to SAP at a fraction of the price it paid for it, would SAP even have an interest in it?