EMC may be in the mood to buy some networking, according to a pair of analysts with Bernstein Research.
As questions around the storage giant's relationship with networking vendor Cisco Systems continue to persist—including in the wake of EMC buying out the bulk of Cisco's stake in the converged infrastructure joint venture VCE last year—EMC may be in the market for a company that would give it its own physical networking business, Bernstein Research analysts Toni Sacconaghi and Pierre Ferragu wrote in a recent report.
If EMC is looking to grow its networking capabilities—it owns most of virtualization pioneer VMware, which offers its NSX software-defined networking (SDN) solution through technology inherited when it bought startup Nicira in 2012—Arista Neworks and Brocade would be good fits, the analysts wrote.
"EMC has repeatedly espoused its view about the value of converged offerings … and recently bought out Cisco's stake in its VCE joint venture, which offers converged storage, networking and servers," the analysts wrote. "Ownership of VCE further loosens the string on what appears to be an increasingly tenuous relationship between Cisco and EMC, and begs the question of whether EMC might look to acquire its own networking capability going forward."
In mentioning Arista, the analysts noted that the 10-year-old company—which is involved in a nasty legal dispute with Cisco over alleged patent infringements—has strong network switch technology, a "strong alignment with EMC's software-defined vision, and has strong technology talent and a good working relationship with VMware." Brocade is a more mature company with strong SAN and IP switch expertise.
"Collectively, the companies might cost [$10 billion to $12 billion] but would make EMC a powerful player in the networking space, with strong platform/product synergies between storage, virtualization and switch," Sacconaghi and Ferragu wrote.
Speculation about EMC buying NetApp or part of Hewlett-Packard's enterprise business makes less sense than Arista or Brocade, they said. Similarly, other possibilities like F5 Networks, Juniper Networks, Citrix Systems and Veritas (which is being spun out of Symantec) would be a more difficult fit.
The Bernstein analysts are basing their speculation on a comment from EMC CEO Joe Tucci at a recent analyst day presentation, in which he said the IT industry will "consolidate over time," and consolidation represents an opportunity for EMC to do deals. They said that by saying "consolidation," what Tucci meant was "convergence."
Any sort of deal would put further pressure on Cisco and fuel more questions about its relationship with EMC. The companies in 2009 partnered—along with VMware—to create VCE to take advantage of the growing demand for integrated data center solutions. However, over the years, various partnerships with other vendors—such as Cisco with NetApp and IBM and EMC with Lenovo—have led many industry observers to suggest a split in the Cisco-EMC alliance. In addition, Cisco and VMware now are competitors in the increasingly crowded SDN space. EMC announced in October that it was buying out most of Cisco's stake in VCE (Cisco now owns 10 percent of VCE, down from 35 percent) and bringing VCE into the fold of its federation, a business model developed by Tucci that includes other companies EMC owns, such as VMware, RSA and Pivotal.
Despite the changing dynamics of their partnership, executives with both Cisco and EMC have said their relationship remains strong. Cisco CEO John Chambers said as much in February when discussing this company's latest quarterly financial numbers (though he was less charitable to VMware).
"In terms of VCE, we have a very good relationship with EMC," Chambers said. "I look for that to be continued very strong. …. VMware is a competitor. We view them as a competitor. We are going to beat them as a competitor and we will beat them and have fun doing it."