EMC to buy most of Cisco share in joint venture VCE

EMC, the maker of storage computers facing pressure from an activist shareholder to break up, said it will acquire most of Cisco Systems’ stake in joint venture VCE, which sells high-end data center equipment.

Cisco will keep about 10% of VCE, the companies said in a statement.

EMC will meld the joint venture into its business, while Cisco and VMware will continue as strategic partners. EMC is the majority owner of VMware. Terms weren’t disclosed.

In 2010, Cisco joined with EMC, virtualisation company VMware and chipmaker Intel to form VCE, which makes pre- configured systems that combines the companies’ technologies. EMC, which has a major Irish plant in Ovens, Co Cork, announced its plan for VCE as activist shareholder Elliott Management pressures it to spin off the faster-growing VMware, saying doing would make the rest of EMC more attractive to other buyers.

EMC’s board has been considering strategic options, including a spinoff of VMware. EMC has also held talks about a merger with Hewlett-Packard, which stalled over disagreements on price, sources said.

VCE provides chief information officers with building blocks for data centres and its sales are on pace to reach $2bn (€1.6bn) in 2014, the companies said.

The VCE transaction is expected to be completed in the fourth quarter.

EMC, which yesterday reported third-quarter earnings that fell short of analysts estimates, also revised its full-year forecast. Full-year earnings will be $1.90 a share on sales of $24.5bn, EMC said. That compares to EMC’s prior forecast for profit of $1.91 on sales of $24.58bn in July.

Bloomberg