Does vCloud Air have a place in VMware's future?

If you follow cloud computing at all, you may well be wondering what’s up with vCloud Air, VMware’s response to public cloud juggernaut Amazon (AMZN) Web Services. It launched two years ago, but there doesn’t seem to be a ton of traction among big customers or service providers, even among the many of them that run VMware’s vSphere virtualization in their own data centers.

Last week, CRN pretty much declared vCloud Air done, reporting that VMware (VMW) will likely stop work on major new upgrades and features. On Monday, VMware announced several new and improved vCloud Air features including a new SQL database service and vCloud Air Object Storage for unstructured data. The latter is a product of a partnership between Google (GOOG) and VMware announced early this year.The news dropped just before VMworld, the company’s annual conference, kicked off Monday morning in San Francisco.

My take is that vCloud Air will end up at another EMC-and-VMware affiliated company dedicated to cloud computing. EMC signaled that intention last spring when it announced its $1.2 billion acquisition of Virtustream, an enterprise-focused cloud company that makes heavy use of vSphere.

Virtustream, led by chief executive Rodney Rogers, according to the release, will join the EMC Federation that already includes VMware, RSA, VCE, Pivotal, and EMC (EMC) itself. Rogers, like the chief executives of other federation companies, reports to EMC chief executive and chairman Joe Tucci.

Asked to comment, a VMware spokesman characterized all this talk as rumor and speculation. “But,” he added, “as you can see we announced today new offerings related to vCloud Air.”

Of course a lot of this depends on how EMC, which owns 80% of VMware, resolves its differences with activist investor Elliott Management, which now owns a good chunk of EMC stock and has pressed EMC to sell off its VMware stake. A standstill agreement between EMC and Elliott Management ends in September. Tick tock.