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Is EMC ripe for the picking?

Lucas Mearian | March 18, 2011
Dell doesn't seem to have the finances to move up the data center stack in one fell swoop, but Cisco does

Dell's low market capitalization, only $27 billion, hardly puts it in a financial position to purchase EMC, even if the company did report $61 billion in revenue last year; EMC reported $17 billion.

EMC's stock prices, for the first time in a long time, have moved out of the teens. Its stock price has risen by about $5 since September, and it's currently trading at about $25.50, giving the company a market capitalization of roughly $53 billion.

Over the past couple of years, some industry pundits have speculated that Oracle or Cisco would be an appropriate suitors for EMC.

Oracle with a market cap of $152 billion is more than healthy enough handle such a sizeable buyout.

However, the rumors that Oracle had been considering an acquisition of EMC fizzled out quickly, especially in light of its buyout of Sun, which it is still working to integrate. Some still believe, however, that Cisco is a viable contender.

"Cisco could use a strong storage company. That's the one that has the money and the wherewithal to get server, storage, virtualization and security together in one fell swoop," said Arun Taneja, founder and president of market research firm The Taneja Group.

For one, Cisco has been pushing itself further and further up the data center product stack. In 2009, Cisco launched its Unified Computing System (UCS) with its own line of blade servers.

Cisco and EMC have also partnered to develop prepackaged data centers known as "Vblocks," which would include Cisco's networking equipment, EMC's storage arrays and VMware's hypervisor technology.

The companies also put together a joint service venture called Acadia, which was later changed to Virtual Computing Environment (VCE). It aims to help users and system integrators build VBlock data centers. VCE just established its headquarters in Richardson, Texas, and is hiring 434 people.

Over the past two years, Cisco has made no bones about its intention to get into the storage space. Infonetics Research released data this week saying that Cisco lead the market in storage switch sales growth , bolstered mainly by the Fibre Channel over Ethernet (FCoE) protocol.

Last year, the company also launched a line of desktop NAS (network-attached storage) devices , but it has made no moves to get into the midrange or high-end storage arena, which is lead by EMC.

Taneja said that like other vendors, Cisco is looking to move up the data center stack with its products, and one major building block for that strategy would be the acquisition of a strong storage company.

"It doesn't have to be a hostile takeover as long as the price is right," he said. "But is Cisco capable of doing a hostile takeover? You and I both know Cisco is capable of being merciless."


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