Cisco Stake in VCE Down to 10%

EMC Corp., Cisco Systems, Inc. and VCE Company LLC announced the next phase of evolution for VCE.

Expected to be finalized this quarter, VCE will become an EMC business.

Cisco and VMware will continue as strategic partners and investors, with Cisco having an approximately 10% equity interest in VCE.

VCE’s charter will focus on simplifying the deployment of hybrid clouds, including a range of converged infrastructure offerings, applying its innovations and expertise to a range of hybrid cloud solutions. Under this next phase, VCE will continue to advance new solutions based on its Vblock Systems, which feature technologies exclusively from Cisco, EMC and VMware.

VCE embarks upon this new structure with full support from its original founders Cisco, EMC and VMware. As part of the EMC family, VCE will remain intact under the leadership of CEO Praveen Akkiraju and his senior team with its own mission, operating charter and organizational structure.

Underscoring their commitment to VCE customer success are existing and renewed multi-year engineering, resell and support agreements among Cisco, EMC and VCE. As part of EMC, VCE will be an integration point for technologies from across the company.

As a successful joint venture, the speed and scale of VCE’s success in pioneering and validating converged infrastructure has been unprecedented, with VCE as the leader. EMC, Cisco and VCE jointly determined that this new structure would serve as the model for VCE’s next phase of expansion, innovation, and long-term growth.

VCE surpassed a $2 billion annualized demand run-rate for Vblock and Vblock-related products and services exiting Q3 2014, its sixth consecutive quarter of greater than 50% year-over-year demand growth.

According to IDC, total worldwide spending on converged infrastructure is growing at 32.8% annually and will reach approximately $14.37 billion in 2017 (up from $5.4 billion in 2013). VCE is the leader in integrated infrastructure systems according to Gartner and IDC. Earlier in 2014, VCE was positioned as a leader in the Gartner, Inc. Magic Quadrant for Integrated Systems, based on an evaluation of VCE’s completeness of vision and ability to execute.

VCE Vblock Systems are engineered, manufactured, managed, supported, and sustained as a single solution, providing a customer experience. More than 1,000 enterprises and service providers have deployed over 2,000 Vblock Systems worldwide, realizing benefits in speeding application deployments, simplifying operations, increasing availability, and reducing costs. A recent study conducted by IDC revealed that, on average, VCE customers were able to deploy new services five times faster, reduce downtime by 96%, and lower their annual datacenter costs by 50% with Vblock Systems.

VCE’s reorganization and recapitalization, which will result in the acquisition of a controlling interest by EMC, are expected to be completed in the fourth quarter of 2014, subject to customary regulatory approvals, and are expected to have no material impact to EMC GAAP and non-GAAP EPS for the full 2014 fiscal year. Once finalized, EMC will begin reporting VCE financials as part of its consolidated financial statements.

Joe Tucci, chairman and CEO, EMC, said: “VCE was created to be a disruptive force by transforming and simplifying IT data center architectures, accelerating a shift to cloud computing. It has been a huge success and has changed the conversation with CIOs. VCE’s size, scale and market reach now requires a more traditional business structure. Our commitment to increased investment will enable VCE to expand the scale and scope of its solutions, helping customers take better advantage of hybrid cloud and next-generation IT opportunities. We would like to welcome Praveen, VCE president Frank Hauck and the VCE team to EMC and congratulate them on the tremendous success of VCE.”

John Chambers, chairman and CEO, Cisco, said: “VCE represents another example of Cisco’s strategy of aggressively investing to drive key market transitions. VCE was created to positively disrupt data center architectures utilizing Cisco’s UCS and Nexus platforms, and we have been thrilled with the execution, results and customer demand the VCE team has delivered. I look forward to the next chapter of VCE’s evolution and Cisco’s continued commitment in VCE as a crucial route to market for Cisco’s next-generation technologies for the data center and cloud.“

Praveen Akkiraju, CEO, VCE, said: “VCE has proven to be a game-changer for customers, dramatically accelerating the deployment of next-generation data center and cloud environments. As the company that pioneered converged infrastructure, I could not be more proud of what the VCE team has accomplished through our customer-centric DNA and deep solution expertise. I am energized by this next phase as we apply the unique VCE experience to enable customers’ journey to the cloud.”