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EMC CEO Tucci: VMware Could Be Spun Off Very Quickly

EMC's Tucci tells investors that VMware could quickly be spun out as a separate company if investors so desire, but made the case that EMC has a much better potential future the way it is organized now.

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Joe Tucci

EMC early next year plans to publicly address the question of whether to spin out or spin off VMware, the company's top executives recently told investors.

EMC Chairman and CEO Joe Tucci late last week told investors at the Wells Fargo Securities Tech, Media & Telecom Conference that while EMC could easily spin out VMware as a separate company, EMC staying together as a whole is better positioned for growth.

Tucci, in a presentation that can be heard here, was responding to a question from Wells Fargo Securities analyst Maynard Um that stemmed from reports that EMC is considering ways to enhance shareholder value by selling its VMware stake or engaging in merger or acquisition talks with other large IT vendors over the remainder of the company.

[Related: What Now For EMC? Many Possibilities After HP Deal Nixed]

EMC and Hewlett-Packard last month reportedly called off merger talks after the two could not agree on price.

EMC's board of directors is very focused on shareholder value and would make a decision about the future of VMware based on what is best for shareholders and the company, Tucci told investors at the conference.

Even so, Tucci said, EMC still sees its current structure, which includes a majority equity stake in VMware, as a key competitive advantage whether in fierce competition against rivals such as IBM or in co-opetition with Cisco.

"[EMC and VMware] go together around Vblocks and we know where we compete," he said. "You have competition from Oracle. You have competition from Microsoft. You have competition from Amazon Web Services. These are big, big companies. So, the thing we have to understand, and I have an underlying belief, is that either you’ve got to be very niched or you better be big and have scale."

The key question investors have to ask is what will make the Hopkinton, Mass.-based company most relevant to customers and help it win deals, Tucci said. "You don’t want to create two things that have less scale or [would] be less relevant," he said.

Tucci said he championed the current organization of VMware, which makes it an important part of EMC or which could make it easily spun out as an independent company.

NEXT: VMware Spinoff Would Be Easier Than HP's Pending Split


Tucci contrasted that to the difficulty rival Hewlett-Packard will have as it splits into a PC and printing business operating as HP Inc. and an enterprise computing business that will do business as Hewlett-Packard Enterprise.

"[HP's] PPS has to go back and do the audit financials sort of spin here," he said. "[VMware] could be spun very quickly. And you always have that option. So, you've got to ask yourself and shareholders, is this the exact right time to do it or should we give it a shot? And that’s going to be your decision, ultimately, you shareholders’ decision."

EMC has built a strategy that is working well, Tucci said. "We have placed the right bets," he said. "We've got to make those bets pay off. And then we've got to give you a better road map, which I promised you in early Q1. We have earnings on January 27th, so it will be sometime after that. And we will lay it out for you. And we will tell you, here is what we are thinking. And then shareholders can make up their decision."

Mike Davis, vice president of technology at Broadleaf Services, a Billerica, Mass.-based solution provider and EMC partner, hopes EMC does decide to make VMware an independent company.

"It's important for VMware's technical advances to be evaluated on their own merits, and not through an EMC lens," Davis told CRN.

Davis used as an example VMware's snapshot capability, which he called a less-efficient way of handling snapshots than what is offered by most storage vendors.

"The inefficient use of storage with VMware snapshots gives the illusion that VMware wants to help storage companies sell more storage," he said. "An independent VMware would also be better able to innovate in spaces where it competes against EMC, such as software-defined storage."

PUBLISHED NOV. 18, 2014

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