EMC Buying Out Cisco's Stake in VCE Joint Venture

By Jeffrey Burt  |  Posted 2014-10-22 Print this article Print
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IDC analysts in June said that Cisco, Oracle, VCE and IBM were the top vendors for converged infrastructure solutions.

The deal comes after more than a year of speculation around the future of VCE and possible tension between Cisco, EMC and VMware as each has made individual moves in a rapidly changing tech environment. Cisco has partnered with EMC storage rival NetApp on data center solutions, and finds itself in competition in the networking space with VMware and its NSX software-defined networking (SDN) platform.  Executives from Cisco and EMC in the past have downplayed any problems with the relationship.

At the same time, EMC's decision to add VCE to its federated management model—where the companies (RSA, Pivotal, VMware, EMC II and now VCE) operate as independent-minded entities that will leverage their capabilities to offer end users stacks of services and solutions, all of which is managed by EMC—comes as some large investors are pushing the storage vendor to do away with the federation and shed its stake in VMware.

Two days after Hewlett-Packard CEO Meg Whitman announced that her company will split in two, EMC investor Elliott Management renewed its efforts to persuade EMC CEO Joe Tucci to sell off its VMware investment and ditch the federation model. Elliott officials and other investors argue that VMware is a drag on EMC's core business and is becoming more of a competitor to EMC, and that the federation model no longer works the way it had in the past. They also question whether the federation—which was implemented by Tucci—can exist after the CEO retires within the next year.

EMC officials have been noncommittal when Elliott has made its desires known, saying in officials statements that they are open to hearing any ideas that shareholders may have. However, Tucci in July said he was reluctant to sell off the VMware stake, telling analysts at a conference that "to me, splitting them up [and] spinning out one of your most strategic assets, I don't know of another tech company that has done that and been successful."



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