EMC takes over joint venture VCE, buying Cisco stake

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Bloomberg/David Paul Morris

Joe Tucci is chairman and CEO of EMC, which took over joint venture VCE amid calls for it to break off its stake in VMWare and Pivotal.

Eric Van Susteren

Digital Producer- Silicon Valley Business Journal

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EMC Corp. is buying nearly all of Cisco's share in VCE, a joint venture launched by VMware, EMC and Cisco in 2010, according to a statement Wednesday morning.

The move means Cisco's share in the venture, which makes high-end data center hardware, will be effectively reduced from 35 percent to 10 percent as EMC takes over the business.

The relationship between EMC and Cisco has been strained in recent years. VMware, which is 80 percent owned by EMC, acquired Nicira in 2012 to compete with Cisco in software-defined networking, a budding business that threatens Cisco's dominance in networking equipment. Cisco last year bought Whiptail, a startup in EMC's core storage market.

An activist investor group has been calling for EMC to split off its stakes in VMWare and Pivotal amid a wave of large tech-company breakups.

EMC Wednesday also posted record third-quarter consolidated revenue of $6 billion, an increase of 9% from the year-earlier period.

Its third-quarter Generally Accepted Accounting Principles net income attributable to EMC was $587 million, slightly below the $586 million from a year earlier.

EMC said VMware's third-quarter revenue within EMC rose 17% from a year earlier as customers continue investing in software-defined data center, hybrid cloud solutions and end-user computing.

Pivotal grew revenue 24% over the same period. It's the fastest growing of EMC's federated businesses, benefiting from the transition to next-generation applications by organizations, EMC said.

Eric Van Susteren is the Digital Producer at the Silicon Valley Business Journal.