Report: EMC To Reveal It's Absorbing VCE Joint Venture, Buying Out Most Of Cisco's Stake

EMC said late Tuesday it's planning to reveal a "new business development" in its third-quarter earnings tomorrow, sending the company's shares up and igniting renewed speculation that it might spin off VMware.

Bloomberg reported EMC is set to reveal it will buy out most of Cisco Systems' 35 percent stake in the VCE converged infrastructure joint venture and absorb VCE into its own quarterly results.

CRN reported earlier this month that Cisco was considering ending future investment in VCE and that EMC would absorb VCE into its federation of subsidiaries, which includes VMware, Pivotal and RSA.

[Related: Sources: Cisco May Stop Investing In VCE Joint Venture With EMC, VMware]

An EMC spokesperson declined to provide additional detail about Wednesday's announcement. Cisco and VCE spokespeople weren't immediately available for comment.

In a meeting with top VCE partners last month, VCE executives foreshadowed a potential change of ownership but said such a change wouldn't affect the technical or architectural roadmap for VCE, sources privy to the discussions told CRN earlier this month.

Cisco will maintain a reduced stake in VCE and will continue investing in the joint venture, according to the Bloomberg.

Sources told CRN earlier this month that EMC will continue to include Cisco UCS servers and switches in its Vblock converged infrastructure products, which also include EMC storage and VMware virtualization software.

Cisco has invested around $716 million in VCE so far, including $185 million in fiscal 2014, the San Jose, Calif.-based vendor said in its July 10-Q filing. As of July 26, Cisco had recorded cumulative losses of $644 million from VCE.

EMC has contributed $1.25 billion in funding and $17 million in stock-based compensation to VCE, according to its June 10-Q. As of the end of June, EMC had recorded cumulative losses of $956 million from VCE.

VMware is also facing calls from activist investor Elliott Management to break up its federation of companies and spin off VMware, in which it owns an 80 percent stake.

PUBLISHED OCT. 21, 2014