VMWare Snatches B-Hive, Opens R&D Center in Israel

VMware (NYSE: VMW), the leading developer of virtualization solutions, has announced the acquisition of Israeli start-up B-hive Networks for an undisclosed sum. Industry experts estimate the price range at tens of millions.  Following the merger in Q3 of 2008, VMWare plans to open an R&D center in Israel, based initially on B-Hive’s facilities and team in Israel.

B-Hive develops technology that measures performance across machines in virtual networks, by monitoring the latency and health of information transfer in the data center. Interestingly, B-Hive’s Conductor was selected as finalist in “Best of VMworld”, a competition held at VMworld 2007. Conductor is currently used by Yahoo, Facebook and eBay among others.

The deal will enable VMWare to improve data center management and atomization. VMWare’s CTO Stephen Herrod was quoted in the official press release on the enhanced capabilities B-hive introduced to data center managment:

…if B-hive identifies degradation in application response time, it can remediate the problem by automatically instructing VMware Infrastructure to adjust the resources allocated to the application or provision an additional virtual machine with an additional instance of the application. In conjunction with VMware’s automated IT service delivery and business continuity capabilities, B-Hive’s service level management capabilities further deliver on the vision of an automated, always-on, virtual data center.

B-Hive Networks was founded in 2005 by CEO Yoav Dembak and CTO Asaf Wexler. To date, the company has raised approximately $7.5 million from Venrock and Index Ventures, as well as private investors.

Another Israeli company operating in the space of business transaction management is Optier. Founded in 2003, the company has 150 employees in Israel and $20 million in revenues a year. Optier is also backed with $45 million in capital from Israel’s largest VC funds: Gemini, Pitango, Carmel, LightSpeed and Cisco.  Following B-Hive’s acquisition, Optier’s CEO Israel Mazin hurried to announce his plans to raise capital to buy several companies, this year. Optier believes that the market is going through a consolidation process and according to the Marker, the company plans to raise $15 million in venture lending from Plenus Capital (unconfirmed).

This is VMWare’s first investment in Israel and considering their $1.3 billion revenues in 2007, I’m suspecting that more deals are underway.

More coverage on the B-Hive/ VMWare merger:

• VMware Buys B-hive for Performance Scans
• VMware buys Israeli BTM start-up B-hive