EMC buys out Cisco’s stakes in VCE as year-on-year revenue jumps 9%

Storage giant EMC has reported a 9% increase year on year for the third quarter of 2014, thanks to revenue rises across its divisions

Storage giant EMC has reported a 9% year-on-year increase for the third quarter of 2014, thanks to revenue rises across its divisions: Pivotal (24%), VMware (17%) and EMC’s infrastructure portfolio including its storage and recovery services (6%).

The company also announced it is buying out Cisco Systems’ stakes in VCE to make it an EMC business. Created in 2009, the Virtual Computing Environment (VCE) coalition by VMware, Cisco and EMC to bundle virtualisation, networking and storage services to accelerate enterprises’ move to the private cloud.

But recently, the three players of VCE have acquired services and firms that brought these complementary services in-house.

For instance, VMware acquired Nicira to build its software-defined networking portfolio, while EMC bought Cloudscaling to enter the compute infrastructure space.

Now, as an EMC business, VCE will become the converged infrastructure offering, aiming to simplify hybrid cloud deployments. But Cisco will continue to hold a 10% stake in VCE and the technology will include offerings from all three companies.

VCE’s sales for the third quarter reached $2bn per annum, accounting for more than 50% year-over-year demand growth. According to IDC, total worldwide spending on converged infrastructure is growing at 32.8%, annually, and will touch $14.37bn in 2017 (up from $5.4bn in 2013). VCE was also positioned as a leader in the Gartner’s Magic Quadrant for Integrated Systems earlier this year.

“VCE was created to be a disruptive force by radically transforming and simplifying IT datacentre architectures, accelerating a shift to cloud computing. It has been a huge success and has changed the conversation with CIOs,” said EMC chairman and chief executive Joe Tucci.

But VCE's size, scale and market reach now requires a more traditional business structure, he said, explaining the buyout.

“VCE has proven to be a game-changer for customers, dramatically accelerating the deployment of next-generation datacentre and cloud environments,” said Praveen Akkiraju, VCE chief executive.

“As an EMC business, we will benefit from being an integral part of an established leader in the datacentre and cloud space and be able to tap into the incredible range of technologies across EMC, VMware, Pivotal and RSA,” Akkiraju said.

The new business structure supports VCE’s broader mission “from the technology and financial perspectives”, he said.

However there was no development on the speculations that EMC may divest itself of VMware after EMC investor, Elliott Management Corp, flexed its muscle and suggested EMC should spin off VMware.

EMC third quarter highlights

Pivotal, with its 24% year-on-year revenue growth, has become the fastest growing arm of EMC’s federated businesses. Meanwhile, enterprises’ investment in VMware’s software-defined datacentre, hybrid cloud and end-user computing contributed to its 17% revenue growth. 

Within its storage division, traditional storage products and backup and recovery products grew 6%, while emerging storage services segment grew 47% , thanks to the strong growth for EMC XtremIO, EMC ViPR and EMC ScaleIO products. 

“Our strategically aligned businesses – EMC Information Infrastructure, VMware, Pivotal and RSA – are well positioned to capitalise on the massive IT market opportunity in front of us,” Tucci said. 

“From my conversations with customers, it’s clear we have the right technologies in cloud, mobile, big data and security. We are well-positioned to help customers maximise their existing IT platforms and build a third IT platform to redefine their businesses with a whole generation of new applications.” 

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