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Spanish telecom giant Telefonica (TEF - Analyst Report) has agreed to acquire desktop virtualization startup eyeOS for an undisclosed amount. The deal will enable Telefonica’s small and medium sized enterprise (SME) customers to offer application service to employees’ devices from any location.

Barcelona based eyeOS provides an open source virtual desktop delivery service through any HTML5 browser, thus eliminating the need to install some other application for the service. Telefonica and eyeOS are collaborating since 2010, and in 2013 the two agreed to develop HTML5 versions of virtualized Windows and Linux application.    

Another major advantage of eyeOS is its low latency and bandwidth consumption, both of which are crucial while offering virtual desktop service over cellular connections. Apart from these, eyeOS offers its own business applications for texting, email and other task management.

We believe the acquisition will benefit both parties. The deal will enable eyeOS to expand services beyond Spain leveraging on Telefonica’s extended international exposure. Meanwhile, the integration of eyeOS with Telefonica will allow the latter to enhance its cloud service based on open technologies. Additionally, eyeOS has some of the big companies, IBM (IBM - Analyst Report), Mitsubishi Electric snd NEC as its clients.

Browser-based desktop-as-a-service (DaaS) is on the rise, which allows users to run an operating system on their device and set up a second one via streaming through the cloud.

Virtualization infrastructure solution provider VMware Inc. (VMW - Snapshot Report) has already acquired DaaS startup Desktone to tap the opportunity. VMware is also working with Google Inc. to provide virtual DaaS service in Chromebooks. Citrix Systems Inc. (CTXS - Analyst Report) has also started to offer DaaS service and has snapped up XenDesktop.

Telefonica currently carries a Zacks Rank #4 (Sell).

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