Michael Dell Looks to Ease Worry of VCE Customers

As his $67 billion bid for EMC moves forward, the CEO says that Cisco will remain in VCE's roadmaps for future products.

Dell CEO

Dell CEO Michael Dell is trying to allay fears of VCE customers that the impending acquisition of EMC by his company will mean big changes to the products they've come to rely on.

In a letter posted on the Dell Website Jan. 25, Michael Dell (pictured) praised the success VCE has had in the growing market for converged infrastructures, saying that once the $67 billion deal for EMC is completed later this year, little will change for VCE or its customers.

"VCE has enjoyed tremendous success, pioneering the converged infrastructure market with the Vblock System, which today is the world's leading converged system," the CEO wrote. "After joining with Dell, VCE's close working relationship with Cisco will continue. Vblock will continue to follow Cisco's compute and networking roadmaps and EMC's storage roadmaps to bring the latest technologies to VCE customers."

VCE was launched in 2009 as a joint venture between EMC, VMware and Cisco Systems. The new company began selling Vblocks, tightly integrated, converged data center infrastructure solutions that use compute and networking products from Cisco, storage technologies from EMC and virtualization offerings from VMware. The idea was to make it easier for businesses to deploy the infrastructure needed for private clouds by offering solutions that already were preintegrated and prevalidated, taking a lot of the workload from data center administrators.

The move worked, and according to IDC analysts, VCE is now the top vendor in the worldwide market for integrated infrastructure, holding 26.3 percent of the market in the second quarter of 2015. Joint offerings from Cisco and NetApp came in second, with 23.8 percent of the market.

In October 2014, EMC officials announced it was buying out the bulk of Cisco's stake in VCE, which also became a part of EMC's federated business model, which also includes VMware, Pivotal and RSA.

A year later, Dell announced plans to buy EMC and its companies in a move designed to accelerate its transformation into an enterprise IT solutions and services vendor that can better compete with the likes of Hewlett Packard Enterprise and IBM. However, VCE companies have expressed concern that Dell may decide to replace Cisco's technologies in the Vblocks with its own server and networking products. However, Michael Dell said in his letter that the plan for VCE going forward includes Cisco.

"VCE, which is now the Converged Platforms Division, is a top strategic priority for EMC, and we share a desire to accelerate VCE's growth and maximize the value that VCE brings to you," he wrote. "We know that VCE is a centerpiece of EMC's 2016 plans, and we are extremely enthusiastic about VCE's future and our continued partnership with Cisco."

Reducing the worries of VCE customers is only one part of a deal that is the largest in the history of the tech industry. Workers at some of EMC's companies—particularly VMware—are worried about layoffs. Fortune reported late last week that as many as 900 VMware employees—about 5 percent of the workforce—could lose their jobs as Dell looks for ways to save money. Fortune reported Jan. 26 that the layoffs had begun.

VMware officials are scheduled to announce their quarterly earnings later Jan. 26. EMC officials will unveil their company's numbers Jan. 27.

Dell officials have said that they expect the company will take on more than $49 billion in debt after the deal closes. The company reportedly is looking to sell some assets—such as its Quest software, SonicWall network security and services unit—to offset some of that debt. Officials with EMC and its federated companies also are trying to reduce expenses to make the deal more affordable.

The values of EMC's and VMware's shares also have fallen since the deal was announced. According to reports, EMC shares have lost more than 10 percent of their value, while VMware's has taken an almost 40 percent hit.