Cloud enablement

How EMC Could Declare War on Cisco

5:50 PM -- I've heard the official talk about them still being friends, but it's hard to believe that Cisco Systems Inc. (Nasdaq: CSCO) and VMware Inc. (NYSE: VMW) aren't at least a little bit awkward as allies, now that VMware is showing aspirations in networking. I think of them like a divorced couple, assigned to sit next to each other at a wedding.

If this were a tabletop game like Risk, it might be time for EMC Corp. (NYSE: EMC) -- VMware's parent company -- to just amass its armies and invade. And what better move to make than to acquire Juniper Networks Inc. (NYSE: JNPR)?

Of course, Risk isn't real life. (How many crucial battles really get fought in Greenland?) But EMC/Juniper sure would be an excellent fit, according to analyst Brian Marshall of ISI Group Inc. He's heard zero talk of such a deal, but in a report Thursday, he outlined why it would help EMC.

EMC is on its way to being a full-blown, all-in-one enterprise supplier. Marshall uses a four-legged stool as his metaphor for this. The legs are computing (servers), storage, networking and security, and they're capped with software and IT services as the seat. (Try not to draw too many analogies about that part.)

EMC has three of those pieces, but the server and networking legs of the stool are provided by Cisco, through the VCE partnership with EMC and VMware. Wisely, EMC has enlisted backup partners Brocade Communications Systems Inc. (Nasdaq: BRCD) and Lenovo Group Ltd. (Hong Kong: 992), just in case.

But what if it wants something in-house? Juniper would be a quick answer. "As 'all roads lead to Hopkinton' [EMC's headquarters] in an enterprise world ... the same holds true that 'all roads lead to North Mathilda Avenue' [Juniper's HQ] in a service provider world as JNPR is “the network innovator” solving the SP quagmire," Marshall writes. Juniper has shown it can go toe-to-toe with Cisco, and more importantly, it comes with a sizable installed base. Arista Networks Inc. , while probably cheaper than Juniper, would force EMC would to work at building a networking empire.

The main reason this won't happen is because VMware isn't avidly battling Cisco yet -- the Nicira acquisition is still brand new. And EMC is coming off a growth phase that puts it in a position of power. I think EMC can coast (relatively speaking) off of its partnerships for a while.

On top of that, I'm not sure all roads do lead to Juniper, given that the company is in a rough patch. But the strategy sure is fun to think about.

— Craig Matsumoto, Managing Editor, Light Reading

lapogunev 12/5/2012 | 5:19:39 PM
re: How EMC Could Declare War on Cisco

So what is the possibility of EMC aquiring Brocade itself, not costly as Juniper and worth more than Arista. Good for EMC cloud related business and can fight with cisco..

StartUpGuy1 12/5/2012 | 5:19:38 PM
re: How EMC Could Declare War on Cisco

If EMC buys brocade, their OEM relationships with HP, Dell and IBM will go away.. And with it, 2/3 of brocades revenue...  Not a good deal for EMC..


gotman 12/5/2012 | 5:19:38 PM
re: How EMC Could Declare War on Cisco

Nothing like a bit of rumor milling on a good weekend... you've english tabloid style..

quicktime 12/5/2012 | 5:19:37 PM
re: How EMC Could Declare War on Cisco

" But EMC/Juniper sure would be an excellent fit".

What's the point here??  EMC's market is enterprise, while Juniper

is good at service provider.

philgr99 12/5/2012 | 5:19:36 PM
re: How EMC Could Declare War on Cisco

Even if EMC were to do this deal, it's hard to imagine they would be able to retain much of Juniper's talent - their corporate culture seems remarkably different and incompatible.

Pete Baldwin 12/5/2012 | 5:19:35 PM
re: How EMC Could Declare War on Cisco

Thanks, gotman! Been a while since someone accused us of that.

But there's no rumor involved here.

BigBro 12/5/2012 | 5:19:34 PM
re: How EMC Could Declare War on Cisco

EMC/JNPR: I'm not quite following the "Juniper would be a good match for EMC" logic: JNPR is, at its heart, a routing vendor, with an installed base, sure, but in the Service Provider market. They're struggling in the data center (QFabric seems to be "circling the drain", despite JNPR's protestations to the contrary), and there doesn't seem to be a "get well plan". JNPR is in turmoil, with executives on the move, and rumors swirling around them consolidating their switching (think "EX" series) and data center ("QFabric") BUs.  (http://www.networkworld.com/co...

EMC/BRCD: Regarding Brocade, there could be a match, but as opticaluser has pointed out, the problem is that BRCD's stock price is based on their current revenues, and 2/3 of that would disappear after an acquisition. So EMC would have to overpay basically by a factor of >3x (they pay $6/share + some premium, and get to keep $2/share worth of revenues). This is why, after 2+ years of shopping the company around (including, as rumor has it, to Private Equity companies!), BRCD is still flailing around as a public company.

EMC/Arista: Instead of blowing $3 billion on BRCD, EMC could take that same money and acquire Arista. The question is whether EMC is willing to pay Arista's price tag, which can't be cheap. Arista has said they're profitable (so is not under pressure to raise money, unlike Force10, which was a deal for Dell because F10 was running out of cash, so not in the best negotiating position), and their investors (Bechtolsheim and Cheriton) have very deep pockets (estimated North of a $1 billion each, roughly the size of the Andreesen Horowitz Fund III, to put that in perspective). Plus, Arista just hired a CFO, so they seem to be heading for the IPO route. They may not want to sell at this point.

KNGPN 12/5/2012 | 5:19:10 PM
re: How EMC Could Declare War on Cisco

Yes, but if VMWARE bought BRCD that would be a different play and a possibility.

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