Ford Invests in Pivotal to Soup Up Its Software
May 05 2016 - 8:20AM
Dow Jones News
Ford Motor Co., like the rest of the auto industry, has a
software problem: Elon Musk's Tesla Motors.
Tesla has set the standard in the auto industry as the
equivalent of an iPad on wheels, offering major software updates to
improve vehicles.
On Thursday, Ford said it will invest $182.2 million in Pivotal
Software Inc., a San Francisco-based software company expected to
help Ford stay competitive as software and cars become one.
"As we look at tech and software and how it is opening whole new
areas for us to provide experiences for consumers, it is important
that we get a level of fluency" in software, said Ford Chief
Executive Mark Fields.
He said Ford takes all competitors seriously, while Tesla caters
to high-end consumers.
Tesla's premium vehicles are fast heading into lower-price
markets. Its Model 3 shaved the Model S price in half, hitting with
a $35,000 price tag that attracted more than 276,000 preorders by
April. The question is whether Tesla can deliver on time. The Palo
Alto, Calif., auto maker on Wednesday reported a wider
first-quarter loss on lower-than-expected deliveries.
For Ford, Mr. Fields said, the Pivotal relationship gives the
car maker access to "really advanced software development methods
and cloud tech skills at a speed at which we wouldn't be able to do
on own."
The investment from Ford in Pivotal is part of a $253 million
round that also includes Microsoft Corp. and vaults Pivotal's
valuation to $2.8 billion. Ford was already a Pivotal customer, and
Ford Chief Information Officer Marcy Klevorn joins Pivotal's
board.
In March, Ford formed a subsidiary, Ford Smart Mobility LLC, and
in April released FordPass, a collaboration with Pivotal that Ford
says it will continue to expand.
FordPass includes a smartphone app that helps users with
parking, car sharing, remote access to vehicles and other services.
Ford ownership isn't required to use the app, and Ford says that
FordPass "aims to do for car owners what iTunes did for music
fans."
The Pivotal investment is also a coup for Microsoft Corp., which
runs Pivotal software, called Cloud Foundry, on its Azure cloud.
Ford in January struck a partnership with Amazon, Microsoft's chief
competitor for Azure, to let drivers control lights, thermostats,
security systems and other parts of their homes from their cars
through Amazon devices like Echo.
Microsoft's other big Azure competitor, Google parent Alphabet
Inc., struck a partnership with Fiat Chrysler Automobiles NV on
Tuesday to incorporate Alphabet's self-driving car technology into
100 Chrysler minivans.
Ford is also opening new software labs in both the U.S. and
Europe that the company says will be staffed with software
architects, engineers and experts in user experience, all using
Pivotal's method of rapidly developing software.
As for Pivotal, the three-year-old company is headed toward an
IPO but has no date in mind, according to Chief Executive Rob Mee.
First quarter revenue was $86 million, up 56% from last year, and
the company claims annualized recurring revenue as of March 31 of
$115 million.
Current Pivotal investors GE, EMC Corp. and VMware Inc. also
participated in the round, taking total funding in Pivotal to about
$358 million. Pivotal spun out of EMC and VMware in 2013, taking
software assets from both companies, and GE at the time invested
$105 million in Pivotal for a 10% stake.
The investment is expected to close this month and is subject to
regulatory approval.
Write to Deborah Gage at Deborah.Gage@dowjones.com
(END) Dow Jones Newswires
May 05, 2016 08:05 ET (12:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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