The Federation will live long and prosper, says EMC
By Gabey Goh June 4, 2015
- Investor pressure to split up, but EMC believes in the collective
- Analysts green-light stance and next-generation Federation capabilities
QUESTIONS about whether EMC Corp would consider selling off its stake in VMware Inc dogged chief executive officer Joe Tucci at the EMC World conference in Las Vegas in May.
Activist investors are pushing for EMC to sell its off 80% stake in the cloud virtualisation software maker, either to another vendor or to make VMware a standalone company.
EMC acquired VMware for US$600 million in 2004, and in its third fiscal quarter, VMware accounted for about a quarter of EMC’s overall revenue, but over half of its net income.
It didn’t help that during the press conference at EMC World, it was cheekily pointed out by one journalist that just a few hotels down, a large gathering of investors and hedge funds managers just happened to be taking place … and was Tucci invited?
“Well, oddly enough, I was not invited and don’t plan on stopping by,” Tucci quipped.
Responding to media questions, he said that both the company and its investors want the same thing, which is to create more value for shareholders.
“Elliott and I are 90% in agreement,” he said, referring to investment firm Elliott Management Corp.
“They say we have great technology assets, a great management team, and pool of talented people, which I agree with – and that our stock is undervalued, which I’m also in agreement with.
“They’ve suggested several ways for consolidation, with spinning off VMWare as one of them, and I disagree with that,” he added.
Elliott Management Corp, which took a US$1-billion stake in EMC last year, is the company’s fifth-largest shareholder and has previously argued that its present structure has hampered stock performance.
Tucci held firm to his stance that EMC would not be spinning off any divisions because collectively, he argued, its ‘federated business’ strategy offers a scale that makes the whole a formidable competitor.
That ‘Federation’ includes not just VMware, but also Pivotal Software, RSA, EMC Information Infrastructure and VCE (Virtual Computing Environment Company).
“We believe the biggest movement in the industry is to the cloud, and the hybrid model will dominate. By 2020, it is estimated that less than 30% of infrastructure will be on the public cloud,” said Tucci.
“The thing I know for a fact is as companies put things together and starting moving towards it, we – the Federation – are being invited to the party. When we compete against other giants together, we win more than if we were to go in alone.
“It’s incumbent upon us to prove sustained shareholder value, and make sure we can demonstrate that in a reasonable amount of time, so the share price goes up and everyone will be happy.
“There are some things we can do to create more shareholder value, and we will get on that but yes, I do believe that we are better together,” he said.
At EMC World (pic above), the company’s senior vice president of Global Solutions Josh Kahn gave an update on the Federation’s solutions portfolio, broadly separated into two categories: Reference Architectures and Engineered Solutions.
“Reference Architectures is where we take different products across the Federation, test them together, configure and document the best practices and performance – then put them into white papers and guides for our customers and partners to use.
“To give them a sense of best practices and assurance that it works today and it will work as demands evolve, security analytics and end-user computing also come under this,” he said.
Engineered Solutions, according to Kahn, is where the company invests software engineering resources to enable a pre-defined outcome. Offerings under this category include Enterprise Hybrid Cloud (EHC) and Business Data Lake.
“We decide 80% of the outcome, and will continue to enhance it, but it is expected to be customised by our customers. It gets them most of the way there, and helps them get up and running,” he said.
The Business Data Lake, launched in March, is the latest addition to the portfolio, and contains structured and unstructured data from a wide variety of sources. Its analytics features are focused on building models to predict the future.
EMC claims that the Business Data Lake can implemented in as few as seven days, and that the solution greatly simplifies the massively complex task of building a data lake. It designed for speed, self-service and scalability.
On the topic of pricing, Kahn noted that this has been “one of the hardest things” the company has had to do, in terms of simplifying transactions.
“It’s one thing to build it, and another to figure out how to sell and quote it. We’ve tried not to price the solution but to simplify the creation of the build materials for our sales organisations, then allow them to use the mechanisms they commonly use to price the transaction,” he said.
Asked about the global market for Federation Solutions, Kahn claimed that EMC is seeing a lot of traction with EHC, but is still working on “getting formal references over the finish line.”
“We have a number of annual goals, or BHAGs (Big Hairy Audacious Goals), and one of them is the adoption of EHC across our customer base.
“If you ask me how many have purchased and deployed this specific solution, it’s below a hundred worldwide, but the number is growing as people get more confident about it,” he declared.
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