With reports from the Wall Street Journal and the New York Times that EMC has been shopping itself to HP, Dell and perhaps Cisco and Oracle (pretty please!) it’s clear that the “EMC Federation” concept has cratered.
Why did it take so long?
While an activist investor – hedge fund Elliot Management – has pushed EMC to divest VMware, reports say that discussions with HP started before that. As StorageMojo noted 5 months ago: “. . . maybe things look more dire inside EMC than we know.”
Back in the go-go 60s the corporate LSD was the conglomerate: a mashup of portfolio theory and the Cult of Management. Put enough unrelated businesses together, the hallucinogenic thinking went, and they can’t all tank at once.
Until they did. Sorry, stockholders!
Joe Tucci, EMC CEO, never called EMC a conglomerate – he gets the optics – but the benefits touted for RSA, VMware and VCE have never materialized. VMware has been a super investment, and the others have been OK, but they’ve left EMC a technology conglomerate, not a synergistic juggernaut.
Architectural lock up
Vendors are always working to lock-in customers, but that cuts both ways. EMC’s key architectures date from the early 1990s. It’s gotten hard to gloss over their decreptitude.
Bigger problem: EMC has made massive investments in the software atop these platforms. As long as they could count on keeping most customer corralled by unique features this was smart.
But now it’s an albatross: with declining sales and margins EMC’s ability to invest in new features also declines, while the need to maintain existing code remains. Now it’s the vendor who is locked-in. The leverage cuts both ways.
It’s the software analog to the telco’s copper problem in the age of wireless: copper’s competitive advantage declined, but the 20 year bonds sold to build them remained.
The StorageMojo take
Joe Tucci, EMC’s CEO, sees all this and – as the strong executive he is – has taken action. He knows EMC can no longer go it alone.
Sure, they can stumble along for years with creative accounting, layoffs and asset sales before reality knocks. But Tucci is doing the right thing by seeking a partner.
Courteous comments welcome, of course. Surprised that IBM isn’t on the list of suitors?