Why Cisco Systems Should Take VMware Off EMC’s Hands

You know, Virtualization Review Editor in Chief Tom Valovic makes a darn good point in his blog: Cisco Systems might well be exploring the idea of buying VMware.

And it should. Cisco already owns 7 percent of VMware’s Class A stock, or about 1.5 percent of the company. EMC owns 84 percent; most of the rest is public property.

VMware, an excellent company, has had a run of bad luck lately, and needs confidence and a new attitude.

Our take: “John [Chambers, Cisco CEO], gather the accountants and lawyers, print out the bank statement, write the check, let’s do this deal.”

Cisco’s got billions of bucks lying around, and it needs VMware’s intellectual property more than EMC does. Cisco’s putting more intelligence into the network with its new switches and routers, and virtualization is a big part of that strategy. Why not go for the market leader?

EMC is a data storage infrastructure company. It doesn’t make servers or business applications; it doesn’t have to own virtualization. It already has profited nicely from owning VMware for five years. Updates can come from within or from other partners. EMC saw VMware as a cash cow when it acquired it for $635 million in December 2003, and it has been exactly that ever since.

But things have changed.

The VMware-EMC corporate match was never one made in IT heaven, and the honeymoon is long over. Two very different cultures, clashing management styles, personality conflicts in high places, opposite geographic ends of the continent, totally incompatible corporate personalities — from the CEOs down to the night guards. It’s a marriage gone south. These two companies have been living separate lives for a long time.

You want to know what would have happened had Microsoft bought Yahoo? Take a good look at EMC-VMware. (“There but for fortune, go you or I …”)

Cisco is an identical California culture to neighboring VMware — a great match. Many of the employees of both companies are neighbors here on the San Francisco Peninsula.

Perhaps Chambers could persuade deposed CEO Diane Greene, VMware’s co-founder and a class act who clashed with EMC boss Joe Tucci, to return.

Three months ago, Chambers dismissed a question during a press conference about whether Cisco would consider either EMC or VMware for a takeover. EMC? No way. That headstrong company is basking in its own very profitable sunshine right now and would be a tough nut to crack for a takeover, to say the least.

But VMware? We can see Chambers stroking his chin in thought right about now.