EMC buys controlling interest in VCE, its joint venture with Cisco

The move comes as Cisco and EMC are increasingly competitive on some fronts

EMC has confirmed it will purchase the bulk of Cisco's stake in VCE, the companies' joint venture in converged infrastructure products.

News of the deal surfaced late Tuesday. The move means that VCE will become an EMC business, with Cisco retaining a 10 percent equity stake. It's expected to be completed in the current quarter.

VCE CEO Praveen Akkiraju and other senior executives will remain in place and VCE will continue to sell products that combine storage, virtualization and networking technology from EMC, Cisco and VMware, according to Wednesday's announcement.

"As we head into the next phase as a company, it's important to understand the context behind VCE's evolution," Akkiraju said in a blog post. "We were created to disrupt the traditional siloed infrastructure market, and without a doubt our initial joint venture structure was a great fit for this mission."

"However, now that VCE is a $2 billion company looking to expand beyond platforms to deliver hybrid cloud solutions, it's critical to evolve to a structure that supports our broader mission from the technology and financial perspectives," he added.

EMC plans to make additional investments in VCE, which will help it "significantly expand" the business, EMC chairman and CEO Joe Tucci said in a statement.

Having a controlling interest means EMC will be able to run VCE with more freedom, something it may value given that Cisco has begun competing with VCE more directly with products such as its Unified Computing System servers.

Tucci downplayed the notion of competitive tensions during a conference call Wednesday. "This was done with very close cooperation with Cisco," he said of the buyout. "Whenever you do a joint venture, they never just sit there and percolate forever. They need to morph."

News of the buyout came on the same day as EMC reported third-quarter revenue was up 9 percent year over year to US$6 billion. But profits were essentially flat at $587 million, compared to $586 million in the year-earlier quarter. The company has been under pressure to improve its finances, with activist investor Elliott Management calling for it to spin off its VMware subsidiary.

There's also been speculation about Tucci's retirement plans. The company has announced that he would remain in place until February 2015, but during a conference call with analysts Wednesday Tucci left open other possibilities.

"You should view February 2015 as a guidepost, not a definitive date," he said. "I told [the board] if they have a person and you want to move earlier, that's fine with me." Tucci is also open to remaining CEO longer but not for years, he added. In addition, if the board were to offer him the ability to continue as chairman, "I would contemplate that favorably," he said.

Still other recent speculation around EMC has centered on merger talks it reportedly held with Hewlett-Packard. Tucci declined to comment when asked about the matter during the conference call.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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Tags Mergers and acquisitionsbusiness issuesNetworkingciscostorageemcVCE

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Chris Kanaracus

IDG News Service
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