Cisco's Chambers Squashes EMC Deal Rumors

Cisco's top executive addressed recent rumors directly when he said Wednesday his company is not looking to acquire storage giant and Cisco partner EMC.

John Chambers' comments to the The Wall Street Journal during the publication's "Viewpoints" breakfast came in response to reports earlier this week in The Wall Street Journal and Barron's that EMC held discussions with Hewlett-Packard and Dell, and possibly Oracle and Cisco, about the possibility of combining with one of them either as a merger of equals or by being purchased outright.

Speculation about such a deal comes in the wake of July reports that activist investor Elliot Management, which acquired a 2 percent stake in EMC to become the fifth-largest investor in the company, was pressing EMC to sell its 80 percent stake in VMware. EMC has since been clear that it does not want to engage in such a deal.

[Related: Do The Math: Investor Pressure Behind Possible EMC Merger, Acquisition]

EMC and Cisco did not respond to requests for more information from CRN.

Chambers was quoted by The Wall Street Journal as saying that a possible Cisco deal for EMC would have happened "a year or two ago" and that there are no such deals currently being discussed.

Of all the possible combinations of EMC and a systems vendor, one with Cisco would be the most likely given how closely the two partner via their VCE joint venture and on developing VSPEX converged reference architectures, according to channel partners of both vendors.

Furthermore, the two have practically no overlap in terms of storage offerings, although the software-defined networking technologies in VMware's NSX and Cisco's ACI offerings strongly overlap and would come under scrutiny if a merger or acquisition were announced.

One solution provider close to Cisco and EMC told CRN under condition of anonymity that such a deal between EMC and Cisco, or between EMC and any of the other systems vendors, is unlikely.

"You have to ask yourself why this conjecture is happening," the solution provider told CRN. "It doesn't look good on paper. It doesn't look good from a business perspective. It's Elliot Management looking at its investment."

Both Chambers and Elliot Management are probably concerned about the growing commoditization of storage, the solution provider said.

"John's probably thinking, 'I've got enough commoditization in my hardware business,'" the solution provider said.

Chambers was probably being truthful in his comments to the Wall Street Journal, the solution provider said.

"He wasn't playing coy, or trying to distract the conversation," the solution provider said. "Although, if I were trying to buy EMC, that's exactly what I'd say to try to drive the stock price down."

EMC closed down 0.44 percent Wednesday to $29.72 for a recent market value of $60.29 billion.

PUBLISHED SEPT. 24, 2014