Tucci: EMC Won't Buy Networking Vendor, Will Keep Strong Cisco Relationship7:54 PM EST Wed. Oct. 24, 2012
EMC Chairman and CEO Joe Tucci in no uncertain terms said that his company, contrary to rumors, has no plans to buy a networking hardware vendor or to see its strategic relationship with long-term partner Cisco diminished.
Tucci used his prepared remarks during EMC's Wednesday financial third-quarter 2012 analyst conference to quell rumors that his company planned to acquire Juniper or another networking vendor and to quiet skeptics who think the EMC-Cisco relationship is in jeopardy after VMware, which is majority-owned by EMC, acquired software-defined networking (SDN) developer Nicira.
"For the record, EMC and Cisco have benefited from a decade-long partnership," Tucci said. "My close personal relationship with [Cisco CEO] John Chambers goes back over 20 years, and we enjoy a friendship of trust and confidence in each other that is reflected in how our teams work with each other."
Questions about the EMC-Cisco relationship came to the forefront after VMware in July acquired Nicira, a developer of SDN technology that has the potential to virtualize many of the functions of high-end networking technology, such as that built by Cisco, and run it on commodity hardware.
That move, plus Cisco's development of a rival SDN technology with possible storage implications via Insieme, a stealth company wholly funded by Cisco, fueled speculation the two would part ways.
Such a move would also call into question the viability of VCE, the EMC-Cisco joint-venture company that prebuilds fully configured, converged infrastructures with server, storage and networking technologies integrated into a single package.
Concerns about a rupture were further fanned by a report last week by stock market news site Benzinga, which speculated that EMC was planning to acquire Juniper networks.
None of these will happen, Tucci said.
"Some have called into question the viability of our relationship with Cisco in VCE because of VMware's entrance into the networking space," he said. "The reality is that software-defined networking complements the network infrastructure, and EMC has no plans to drive deeper into networking by acquiring a networking hardware company. We believe continued innovation in the network infrastructure by a partner ecosystem will enable higher performance transmission of data in the next-generation data centers. In short, we are committed to work closely and cooperatively with Cisco, our premier partner."
NEXT: VCE A Top EMC Strategic Priority
VCE is a top strategic priority for EMC, Tucci said.
"We continue to ramp investments in VCE, which continues to meet and exceed our business objectives, approaching a $1 billion run-rate in less than three years. There are now over 500 VCE customer deployments, including many in large Fortune 500 companies. These customers demanded, and are receiving, the benefits of rapid deployment, higher performance and higher availability. And very importantly, they are getting these benefits at a lower total cost of ownership.
"In short, we believe VCE represents the fastest and most cost-effective way for organizations to build out their cloud infrastructures, and we are committed to VCE's success."
That said, SDN remains a big part of EMC's strategy to take the high ground in the nascent software-defined data center market, Tucci said.
"I truly believe this software [defined data center] technology will spark a revolution in the data center market through the tight integration and automation of compute, storage, network and security infrastructure assets," he said. "This will help customers receive unmatched efficiency, control, choice and agility."
For its third fiscal quarter, EMC on Wednesday reported revenue of $5.28 billion, an increase of 6 percent over its third-quarter 2011 revenue.
Income for the quarter was reported as $626 million, up 3 percent over last year. Earnings per share rose 4 percent over last year to reach 28 cents.
Tucci said he was disappointed EMC did not meet its internal expectations for the quarter, and that the company broke an uninterrupted string of 10 consecutive quarters of double-digit top- and bottom-line growth.
"But that said, I do believe that, given the significant uncertainties that permeate the global stage right now, and its negative impact on global IT spending, we more than held our own," he said.
Tucci was referring to two uncertainties. The first is economic uncertainty, as most major markets around the world experienced slower growth in GDP in the third quarter. The second is political uncertainty, or the inability of governments around the world to make decisions on debt and deficit reductions.
"Collectively, these economic and political uncertainties are affecting business confidence," he said. "And this is affecting IT spending rates."
NEXT: Uncertainties Delay IT Spending
In the third quarter, these uncertainties caused a delay in IT spending, resulting in late orders, orders which came in too late to ship, and orders that slipped out of the quarter, Tucci said. "That said, to be clear, we still believe that IT spending in the second half of the year will show some growth over last year, albeit at a slower rate than was experienced in the first half of this year."
Last quarter, EMC had expected overall global IT spending to grow 3 percent in 2012, but now expects it to grow 2 percent. Fourth-quarter 2012 growth will be higher than that of the third quarter, but from a lower third-quarter baseline than previously expected, Tucci said. EMC's forecast for 2013 IT spending calls for modest growth, he said.
PUBLISHED OCT. 25, 2012