Monday, November 2, 2009

VCE Alliance Rumored to Announce Formal Venture this Week

Since August, rumors have been swirling around the VCE (VMware, Cisco, EMC) alliance companies that a data center joint venture (code named Alpine) was imminent. Fast forward to October 30th when Reuters reported that VCE was preparing to announce a new line of networking, computing, and storage products dubbed "vBlock" to better compete against IBM and HP.

Although officials from all three companies have declined comments, several industry trades have reported the rumor appears a good bet and that it will likely be announced ahead of Cisco's Q1FY2010 financial results due after market close on Wednesday.

The joint venture would allow the companies to appear as one from a customer perspective, but be backed by the credibility and balance sheets of Cisco and EMC. It remains to be seen whether the three separate companies can pull off a neutral position with their existing technology, OEM, and channel partners. Judging by the recent announcements from Dell and IBM partnering with Juniper Networks, the bigger, more strategic partners will increasingly hedge their bets by establishing partnerships with VMware, Cisco, and EMC competitors.

It's interesting that two of the most acquisitive companies in the industry would do a joint venture rather than a traditional merger. But with Cisco's $133 billion market capitalization, and EMC and VMware's combined $49 billion valuation, neither can easily afford to buy the other; however, they can ill-afford to allienate their existing >10% revenue partners either.

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