EMC takes the reins of VCE, buying out more of Cisco’s stake

EMC’s controversial federation of affiliated companies is getting a little bigger, or at least a bit more complicated — VCE, the joint effort launched in 20o9 by EMC, VMware and Cisco, will soon become “an EMC business,” according to a statement released Wednesday morning, at roughly the same time EMC announced disappointing third quarter earnings.

In effect, [company]Cisco[/company] will be reducing its stake in [company]VCE[/company] — which makes vBlock converged data center hardware, comprising Cisco networking gear, EMC storage and VMware virtualization — from 35 percent to 10 percent, although EMC said both Cisco and VMware will continue their “full support and alignment” with VCE.

During a conference call, Howard Elias president and COO of EMC Global Enterprise Services, confirmed that Cisco will hold a 10 percent stake in VCE, VMware “somewhat less than that,” and EMC will hold the rest.

Per EMC’s release which was posted just as EMC announced third quarter results

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 full range of converged infrastructure offerings, applying its unique innovations and expertise to a broad range of hybrid cloud solutions.

Bloomberg News first reported on EMC’s plans on Tuesday, Cisco blogged about it here

The EMC federation has become something of a hot button. [company]EMC[/company] owns about 80 percent of [company]VMware[/company], one federation member along with RSA and Pivotal. Activist investor Elliott Management has been pushing EMC to break up the band — in particular selling off VMware to “maximize shareholder value” — while EMC CEO and Chairman Joe Tucci has staunchly maintained that the federation works just fine as is.

On the call, Elias and Cisco President Gary Moore, stressed that the decision was mutually agreed upon by EMC and Cisco.

But the VCE alliance has been mightily strained, especially since EMC-backed VMware bought Nicira two years ago and along with it a toehold in the emerging software-defined networking space. Cisco and VMware have pretty much been at each other’s throats ever since.

emc federation

Note: This story was updated at 6:52 a.m. PDT with additional detail from a VCE conference call.