EMC Tightens Its Embrace of VMware
March 10, 2009, 1:10 pm
By Ashlee Vance
If EMC does plan to sell off its controlling stake in VMware, the company is maintaining a spectacular poker face.
On Tuesday, EMC held its first broad strategy update in almost three years. The company’s chief executive, Joe Tucci, presided over the affair, more than half of which centered on the virtualization software sold by VMware.
“We have no intention of separating these two companies,” Mr. Tucci said during his opening speech in Boston, which was also Webcast.
It has been more than five years since EMC acquired VMware for $635 million. As a result, the maker of data storage systems would face minimal tax implications if it decided to sell off its close to 85 percent stake in VMware.
Analysts have argued that VMware could perform better as an independent entity, particularly since much of the company’s business comes through EMC competitors like Hewlett-Packard and I.B.M. Cisco Systems, which owns 2 percent of VMware, is often mentioned as a potential suitor.
VMware, however, stands as one of the sexiest parts of EMC’s business. Its software gives EMC serious leverage in data centers, which have moved more and more towards virtualization software that allows more applications to run on each physical server and allows applications to move between physical systems.
EMC’s two-hour strategy session was divided equally between Mr. Tucci and VMware’s chief executive, Paul Maritz, emphasizing just how important virtualization has become for EMC.
Mr. Maritz, once a top executive at Microsoft, boasted that VMware has shifted towards building a virtual operating system that runs not just servers but also storage and networking gear. Meanwhile, he said, competitors like Microsoft and Citrix continue work on their base virtualization products.
“It’s not for lack of focus or will,” Mr. Maritz said. “It is just hard stuff to do.”
VMware has thrown 2,000 people at its upcoming vSphere suite that will ship this year. That’s more employees than Microsoft put behind its Windows NT operating system, according to Mr. Maritz.
VMware’s competitors have tried to undercut the company on price by giving away their basic virtualization software. Still, in its most recent quarter, VMware posted revenue of $515 million, up 25 percent from a year earlier, and net income of $111 million, up from $78 million.
During the precious few moments not dedicated to talk of virtualization, Mr. Tucci also discussed EMC’s intentions to grow its flash-based storage business. EMC has been aggressively pursuing flash memory systems, which bring higher prices and deliver higher performance than traditional spinning disks.
When EMC first started selling flash systems, the disk drives cost 40 times as much as standard drives while running 30 times faster. About one year later, the price of the flash drives has fallen by 76 percent, Mr. Tucci said.
“They’re still 30 times faster but now it’s only 8 times the cost,” he said. “In the last two quarters, we sold every flash drive we could get our hands on.”
EMC plans to roll out new flash storage systems “in the very near future,” he said.
bits.blogs.nytimes.com |
