Daily Archives: September 3, 2009

Devil in Details as Cisco and EMC Mull Services JV

A professional-services joint venture between Cisco Systems and EMC Corp. is theoretically sound. Whether it will excel in practice, presuming it happens, is harder to say.

As reported by the Wall Street Journal, quoting sources briefed on the plan, the joint venture would target large businesses. Its focus will be winning customers for and implementing the products of Cisco and EMC. Each company reportedly would have board representation in the joint venture.

Much will depend on how seriously each company takes the endeavor, and whether the partnership fully utilizes the assets of EMC’s majority owned VMware, which could provide essential added value with its virtualization software. As Marguerite Reardon notes at CNET, Cisco also owns a small piece of VMware.

For now, neither Cisco nor EMC has affirmed the report. Cisco refused to comment on “rumor and speculation.” EMC issued an ambiguous non-denial citing the longstanding strategic alliance between the two companies, adding that the relationship is subject to broadening and strengthening.

There’s mutual need, of course. Cisco and EMC increasingly are arrayed against mutual competitors. Cisco relatively new Unified Computing System, which comprises blade servers as well as network infrastructure, has placed it into varying degrees of competition with HP and IBM, two companies that hitherto have served as lucrative channel partners for Cisco.

Over at Barron’s Tech Trader Daily, Eric Savitz says some people are wondering whether Cisco and EMC might eventually merge. It’s unlikely. Savitz notes that EMC’s market capitalization is above $30 billion, and we know from Cisco history’s that it never has done a deal of that size.

Moreover, large deals meshing east- and west-coast companies typically have not gone well. Cisco will vividly remember the merger of Massachusetts-based Wellfleet and Valley-based SynOptic that created Bay Networks. That corporate union seemed to make sense on paper, but it was a catastrophe in the real world. Two viable Cisco competitors combined to become one big failure, riven by disunity and infighting, eventually bought for too much money by a profligate Nortel Networks before fading into oblivion.

There are other notable examples in which east and west haven’t exactly come together like milk and cookies. Cisco knows its M&A history, as does EMC. I don’t see either company rushing into a shotgun marriage, even if they do choose to have joint-venture progeny.


Oracle’s Wait Continues as EC Launches In-Depth Probe into Sun Takeover

Reuters’ sources were right: European Commission (EC) regulators today opened an in-depth investigation into the $7.4-billion acquisition of Sun Microsystems by Oracle Corporation.

The EC’s initial market investigation indicated that the proposed merger raised “serious doubts” and “competition concerns” relating to the database market. In opening a detailed inquiry, the EC has given itself an additional 90 working days — until January 19, 2010 — before it must render a regulatory verdict on the takeover.

Said Neelie Kroes, EC competition commissioner:

“The Commission has to examine very carefully the effects on competition in Europe when the world’s leading proprietary database company proposes to take over the world’s leading open source database company. In particular, the Commission has an obligation to ensure that customers would not face reduced choice or higher prices as a result of this takeover. Databases are a key element of company IT systems. In the current economic context, all companies are looking for cost-effective IT solutions, and systems based on open-source software are increasingly emerging as viable alternatives to proprietary solutions. The Commission has to ensure that such alternatives would continue to be available”.

Bloomberg reports that Oracle competitors, including SAP AG and Microsoft Corp. lobbied for an extended probe, arguing the deal could drive up prices for databases.

Initially, Oracle had hoped to close the Sun deal by the end of August. Those hopes proved unrealistic. The inhabitants of the executive suites at Redwood Shores cannot be pleased that they will have to wait until well into winter before learning whether they can proceed with the integration and assimilation of Sun’s assets.

Meanwhile, as Oracle waits for a definitive outcome, Sun’s lines of business, especially its hardware business, are left twisting in the regulatory wind. Sun’s server customers are being expertly courted by IBM and HP, Sun’s financial performance and market share are suffering, and morale on Sun’s Silicon Valley campuses cannot be great.

Oracle’s master plan for Java, and everything else in the Sun fold, have been suspended. While the likely outcome ultimately remains some form of EC regulatory approval, the value of Sun’s business assets will be impaired by the extended review process.