VMware Is Selling Part of Its Cloud Business

April 4, 2017, 2:39 PM UTC

vCloud Air, VMware’s long-gestating cloud effort has found a home—and it’s not with VMware.

VMware (VMW) is selling the business to OVH, Europe’s largest cloud hosting provider—meaning OVH runs key applications like email for customers.

vCloud Air, which has led a fraught existence in the age of Amazon Web Services, was VMware’s attempt at enabling companies that run VMware’s server virtualization technology in their own data centers to extend them out to third-party data centers. Those data centers would run vCloud Air. The use of both on-premises and third-party data centers as needed is known as a hybrid cloud.

Terms of the deal were not disclosed. OVH is in the midst of expanding OVH US, its stateside subsidiary based in Reston, Va.

In an interview after the announcement, VMware chief executive Pat Gelsinger told Fortune that the sale includes vCloud operations and sales personnel, data centers, and customers. But the core hybrid cloud technology underlying the product remains with VMware.

The sale does not affect the status of vCloud Air Network partners which, contrary to what one might think from the name, do not run vCloud Air itself. Instead these partners, which include IBM (IBM) and Rackspace, run other VMware foundation technologies.

Russ Reeder, CEO of OVH US, said that the company is gearing up its stateside operations with new data center locations in Vint Hill, Va. and Portland, Ore. as well as existing facilities in Quebec, Canada.

The plan is to use vCloud Air to help current VMware customers move their workloads to OVH data centers without disruption, Octave Klaba, founder and chairman of OVH, told Fortune.

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Amazon Web Services (AMZN) was a huge threat to VMware and other legacy tech companies because it has been aggressively wooing their customers to move both applications and data to its own cloud data centers. There was not a lot of room in Amazon’s world view for off-site customer data centers running VMware services.

Further complicating the picture was the fact that in 2015, EMC, then VMware’s parent company, bought Virtustream, an enterprise-focused cloud company that seemed to compete with vCloud Air from within its own ecosystem. Dell subsequently purchased EMC to form Dell Technologies.

But most telling, last fall, VMware buried the hatchet with AWS, with the two companies agreeing to run VMware’s technology as an option on AWS for customers who wanted an easy on-ramp from their own VMware-heavy data centers to the massive arrays of AWS infrastructure.

With this news, San Jose-based VMware is also reiterating its previously issued financial guidance for Q1 and the full fiscal year 2018.

Note: (April 4, 2017 12:19 p.m.) this story was updated to include quotes from VMware and OVH executives.

(April 5, 2017 9:50 p.m.) This story was updated to clarify that vCloud Air Network partners do not run vCloud Air.

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