EMC Buying Spree Over?

 
 
By Chris Preimesberger  |  Posted 2007-02-14
 
 
 

Has the voracious lion of the data storage industry mellowed a bit? EMC, the worlds largest vendor of storage software and hardware, indicated Feb. 6 at the RSA Conference here that it has put a hiatus on major acquisitions after swallowing 31 companies in the last five years, including RSA Security itself.

EMC President, CEO and Chairman Joe Tucci also hinted that the $11 billion corporation will be playing in the online storage market in 2007—not exactly welcome news for the other companies in that space.

In addition, the Hopkinton, Mass., company announced Feb. 7 it will sell off 10 percent of its prize VMware subsidiary in an IPO (initial public offering) to be held this summer.

"Weve made a lot of acquisitions over the past few years, and RSA Security was among the biggest. It also has been far and away the smoothest acquisition," Tucci told reporters and analysts. "But it doesnt look like we will be actively seeking acquisitions in 2007 the way we have in the past. In my mind, right now, there is no company Im looking at to buy."

That will be welcome news to some EMC stockholders, a number of whom have disagreed wholeheartedly with the current administrations aggressive takeover strategy. They have contended—sometimes loudly—at quarterly earnings meetings that the company is growing too fast for its own good and could collapse under its own considerable weight.

EMCs stock price took a sharp 7 percent drop when its $2.1 billion acquisition of RSA, the worlds largest data security company, was revealed last July. But the move has been well worth it; RSA made $310 million in fiscal year 2005 and is expected to move way beyond that for the 2006 fiscal year.

Tucci said he likes the position the company is in today. EMC owns 28 percent market share in the global data storage software space and about 21 percent of the worldwide external disk storage hardware market. EMC is also among the top three companies in several other world markets, including storage systems of all kinds and storage services.

"Rather than do another large acquisition, I think right now, for 2007, Id like to see us focus on the job at hand," Tucci said. "We might make some small acquisitions, perhaps in virtualization or in the services area. In any case, there will be no big new moves on the chessboard. We need to beef up what we already have."

Tucci hinted that EMC will be moving into the online storage service business this year. Other companies, such as Hewlett-Packard, Comcast, AT&T, Verizon, CommVault and a number of startups also are in the online vaulting business. In online vaulting, archived copies of data are kept in a service providers own storage servers instead of in-house.

"I disagree with [online outsourcing] as a trend," Tucci told reporters and analysts at the Moscone Center. "I dont think thats the case right now. It is very difficult—and mostly unwise—to separate your servers and your data, especially for large enterprises."

However, Tucci said, its a good thing to keep a backup copy of your data archived off-site or online with a trusted partner or service. "For companies that have to keep e-mail for seven years, data vaulting for backup is good," he said. "Comcast, AT&T and Verizon will store rich media for you online ... but there is no market for [large corporations storing everything online]; its not going to happen. The paradigm isnt even a little bit feasible."

Thats when Tucci leaked the news: "You will see EMC playing [in the online arena] this year," he said.

Separately, EMC announced it plans to sell about 10 percent of its rapidly growing VMware subsidiary through an IPO of newly issued VMware stock. EMC will retain ownership of the remaining 90 percent of VMware. Tucci said in a conference call that the company has no intention of spinning out or otherwise divesting this 90 percent ownership interest.

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