EMC Buying Chunk Of Cisco's JV Stake

by CXOtoday News Desk    Oct 22, 2014

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Data storage provider EMC is buying a chunk of Cisco System’s stake in a joint venture company called VCE that sells computing gear to corporate customers. Bloomberg which reported the development said, citing people with knowledge of the matter that Cisco too will retain investment in the business, but at a reduced stake.

VCE, an acronym that stands for virtual computing environment, was established in 2009 with investors that also included VMware and Intel. The venture  offers so-called “IT convergence” technology, which aims to dramatically simplify data-center infrastructure. It integrates EMC storage devices, Cisco networking gear and software from VMware, a company majority-owned by EMC – making it a one-stop platform for enterprise IT.

However, increased competition between partners gave way to merger or spinoff opportunities. IT analyst Ben Keeps writes in Forbes that the companies spent as much time tearing each other up in competitive deals as they do collaborating.

EMC now plays in the compute space having recently acquired OpenStack vendor Cloudscaling and VMware, post it’s acquisition of Nicira is a strong networking vendor. Cisco, since its acquisition of OpenStack vendor Metacloud, also competes on many levels with both VCE itself and its co-owners. 

However, reports of EMC and Cisco encroaching on each other’s turfs had sparked off rumors of the partnership fraying.

Bloomberg reported that EMC will merge VCE into its business and consolidate its sales into its quarterly results and this the site stated could give EMC a much-needed financial boost.

Activist shareholder Elliott Management has been reportedly pressuring EMC to spin off faster-growing VMware, saying the parent company is undervalued and the companies now compete and hinder each other’s opportunities. 

According to reports, EMC’s board has been considering strategic options, including a spinoff, and held talks about a merger with Hewlett-Packard that stalled over disagreements on price, as cited last month. EMC is also rumored to be closing in on a deal to buy cloud start-up company Maginatics.