Cisco Systems Still Won't Say It Plans To Continue Investing In VCE Joint Venture

Cisco Systems said it's not planning to exit its VCE converged infrastructure joint venture with EMC and VMware, but the vendor still isn't explicitly saying that it plans to continue investing in VCE.

"Cisco is not pulling out of VCE. VCE customers and partners can be assured that they have the full commitment of Cisco and EMC going forward," a Cisco spokesperson said in an emailed statement Friday.

Cisco provided the same statement to other media outlets following the publication of CRN's story on Wednesday, without offering a direct answer to the fundamental question of future funding. The fact that Cisco plans to maintain its stake in VCE is not in dispute by CRN's sources.

[Related: Sources Say Cisco May Stop Investing In VCE Joint Venture With EMC, VMware]

Asked whether "full commitment" means a continuation of the $716 million investment Cisco has made in VCE thus far, the Cisco spokesperson said the vendor will not be elaborating further.

Sources with knowledge of the matter told CRN earlier this week Cisco is considering ending further investment in VCE but will keep its 35 percent stake in the joint venture, whose Vblock products feature UCS servers and switches.

Vblocks also feature EMC storage and VMware virtualization software, and VCE handles product configuration, integration and support.

One VCE partner told CRN it's hard to see why Cisco would walk away from VCE entirely because it's such a big driver for UCS sales.

"As long as there is a revenue stream for Cisco [in VCE], they will still continue," the partner told CRN, speaking on condition of anonymity because he's not authorized to speak publicly about company matters.

"EMC is doing all the builds and is manufacturing all of this in Hopkinton [EMC's global headquarters in Massachusetts]. There is not much risk at all to Cisco besides development," the partner said.

At a meeting with top partners last month, VCE executives indicated potential ownership changes ahead but assured them that VCE's' technical and architectural roadmap would remain the same.

If Cisco does halt further investment in VCE, EMC may bring VCE into its federation of subsidiaries, which includes VMware, Pivotal and RSA, sources said.

Cisco and EMC are still working out the details of how this would work, but are expected to make a decision -- and perhaps an announcement -- on these moves by the end of the year, sources said.

Some VCE partners told CRN they think VCE has reached a point in its maturity where it's not as dependent on parent vendor investment as it has been in the past.

Stu Miniman, senior analyst at research firm Wikbon, doesn't think customers would avoid VCE Vblocks if Cisco does stop investing.

"With a $1.8 billion run rate, how much outside money do they need?" Miniman told CRN. "If you ask me, if Cisco tamped down on the flow of money to VCE, would they be OK? Yes, I think so."

However, other VCE partners feel Vblock sales will get a lot tougher if such a scenario does come to pass.

"If Cisco did pull out I believe it would be the end of VCE," said one partner, who requested anonymity. "I would never push my clients in VCE's direction [if Cisco cuts funding] because I don’t think it is long for this world."

PUBLISHED OCT. 10, 2014