I don't proclaim to understand all of VMware's acquisitions of the past few years, but this one is really puzzling.

DynamicOps tools are built on a .NET stack (VMware are clearly a Java shop) and while their platform is a worthwhile in its own right, it duplicates a lot of functionality with products VMware already has or has functionality VMware could build without much effort given the swath of automation tools they already have ( DynamicOps tools just interface with published APIs from Microsoft and Citrix).

Probably a defensive acquisition I guess. I can't see integration with existing VMware products working at all.

This isn't actually as surprising as you might think. Several of the Enterprise Management products they picked up in the last few years, including some from EMC, are .NET based. Two of those were products focus on provisioning and managing non-VMware systems which they have been attempting to combine into a single product for almost a year now. DynamicOps would fit into that nicely and hopefully fill a couple gaps in their existing functionality at the same time.

It is indeed a rather strange acquisition move. DynamicOps is platform agnostic, ie vmware/xen/kvm, so I wonder if they are going to make it VMware only product? Also, how is this going to co-exist with their vCloud director product?

An increasing amount of VMWare software is hypervisor agnostic (eg CloudFoundry).

I don't fully understand their strategy (maybe - anywhere there is a "cloud" VMWare is there or something?) but they are pretty consistent about it.