EMC's Tucci: No More 'Constipation' Over Dell, EqualLogic

EMC's Joe Tucci said that Dell's expectations regarding the storage sales from its EqualLogic acquisition are too high, but that the relationship between his company and its largest reseller partner have overcome a bit of "stalling" and "constipation" in the field.

Tucci, EMC's chairman, president, and CEO, made the remarks in response to analysts' questions during the company's second quarter 2008 financial report on Wednesday.

Tucci also said that the decision earlier this month to replace VMware's top executive was made in the best interests of the company's shareholders.

Diane Greene, president, CEO, and co-founder of VMware, was replaced by Paul Maritz, a former Microsoft exec who joined EMC when that company acquired software startup Pi Corp. in February.

EMC on Wednesday reported its twentieth consecutive quarter of revenue growth, as well as strong earnings growth, and said that revenue from its information storage, content management and archiving, security, and VMware businesses all grew by double digits over the same quarter last year.

However, wrote analyst firm Robert W. Baird & Co. in a research brief after EMC's earning reports, revenue for the vendor's midrange Clariion product line grew only 8 percent over last year.

The reduced growth of the Clariion line was "due in part to the Dell/EqualLogic acquisition, and potentially some cannibalization from EMC's Celerra products," Robert W. Baird & Co. wrote.

Dell acquired storage vendor EqualLogic early this year in a $1.4 billion deal.

Dell, which in addition to its own EqualLogic and PowerVault lines also resells EMC Clariion storage products, accounts for about 12 percent of EMC's total revenue, the analyst firm wrote.

Tucci, who was asked during Wednesday's earnings conference call about the slowdown in Clariion sales and the impact of Dell's acquisition of EqualLogic on EMC, said the two events "caused us a little bit of a slowdown."

Tucci said that, after the acquisition, EMC and Dell probably created some confusion in the sales forces of both sides, and that he and Michael Dell, chairman and CEO of the company that bears his name, would both probably agree that their relationship has since recovered.

""We have this thing back on track," he said. "We have a positioning. They do believe there's a good future. Obviously, they're still high on what they believe they can accomplish with EqualLogic. But they do believe there's a very good future, and good growth opportunity with them for the Clariion line. We have really hard actions between the two of us back with our field to make that happen, and we believe it will happen. Those actions caused a little bit of stalling, a little bit of constipation, in the field, and we're now through that. "

When asked about the replacement of Greene with Maritz at VMware, Tucci said that the measure of a great technology company is related to how large its market is, how fast it is growing, and whether it is a strategic partner to its customers.

The answer in VMware's case, Tucci said, is that it is the dominant leader in the server virtualization market, one that is growing quickly and which in the next several years will reach double-digit billions of dollars.

"VMware is at the nexus of three of the macro trends in technology for the future: the virtual data center of the future, cloud computing, and virtual desktop computing," he said. "It's a great place to be, and we're going to make sure it's a rewarding place to be. And we will retain and recruit great talent to this company."

Tucci said he has known Maritz, VMware's new leader, for years, and has worked closely with him in the last six months. "And I can tell you, he's a world-class technologist, he's a true technology visionary, he's a very, very good businessman, and he's an excellent leader," he said. "We have the right person in place at the right time to lead VMware."

Tucci ended by saying that he has met with several of VMware's largest partners to assure them that, despite the leadership change, VMware will continue to work "openly and fairly" with them. He also said that EMC has no plan to spin out the remaining 85 percent share of VMware currently owns.

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