EMC CEO Tucci: Dell 'Had Nothing' To Do With Planning For New Cloud Services Unit

EMC CEO Joe Tucci on the company’s third-quarter earnings call Wednesday said Dell had "absolutely nothing" to do with its plan to create the cloud services business unit it unveiled jointly with VMware Tuesday.

The new joint business stems from EMC's $1.2 billion July acquisition of Bethesda, Md.-based cloud software and Infrastructure-as-a-Service firm Virtustream. It will be led by Virtustream CEO Rodney Rogers and have its own board of directors comprised of executives from both companies, with Tucci as the chairman.

"I can absolutely guarantee everybody on this call or everybody in the world that Dell had absolutely nothing to do with this transaction," said Tucci. "This was a transaction driven primarily out of VMware with us."

EMC reported an 18 percent decrease in profit for the third quarter, but Tucci focused the majority of his remarks on the earnings call around Dell, VMware and Virtustream. "We expect [Virtustream] to be multiple hundreds of millions dollars in revenues in 2016 and we fully expect this business to be multibillion dollars in size within several years as all of our federation businesses drive revenue opportunities for this new cloud service," he said.

[Related: EMC's Tucci Attempts To Calm Investors As VMware Shares Plummet]

Partners believe there is enough appetite in the market for cloud services right now to allow Virtustream to hit its billion-dollar mark over the next three to five years.

"There's [VMware] vCloud Air that we're selling that if they ramped it up in Virtustream, [it] could do some real damage in the market," said a top executive at a solution provider that partners with EMC and Cisco Systems and who declined to be identified, in an email.

The solution provider also said that depending on the channel program implemented, it could help EMC partners better compete against Amazon Web Services.

"The combination of Virtustream cloud services with leading software-defined data center assets in VMware and EMC [Information Infrastructure] gives us a unique and powerful capability to help customers manage their applications, including their most mission-critical applications in the cloud both on-premise and off-premise," said Tucci.

Ethan Simmons, vice president, East, for Dallas-based Lumenate, an EMC and VMware partner, said partners were waiting to see what EMC was going to do with the Virtustream acquisition and is optimistic the new company can drive profitability in the channel.

"Everyone's looking to see how the pieces fit together between EMC's own cloud offerings with Virtustream, vCloud Air, how those get pulled into the federation and how it's messaged to the customer as a cohesive solution because I think it is going to be key going forward," said Simmons. "Overall, it's probably slow to market and, obviously, AWS and Amazon are the front-runners in that space. But if you look at our customers, the majority of them only have a small footprint in the cloud and there's still a lot more opportunity over time for more of that infrastructure to move through the cloud and cloud-type services."

As for the EMC's financials, third-quarter revenue was up 1 percent to $6.08 billion year over year, although the Hopkinton, Mass.-based company said without the effects of currency exchange rates EMC would have posted a 5 percent increase to its overall growth.

EMC posted $480 million in net income for the quarter, down 18 percent from $587 million in the same period a year ago.

Its core Information Infrastructure business revenue was $4.35 billion, a decline of 3 percent compared with the same period a year ago, while its storage revenue was down 2 percent year over year.

New storage products accounted for more than half of revenue and EMC said it is expecting that XtremIO should have more than $1 billion in bookings in 2015. Pivotal generated $67 million in revenue, up 16 percent year over year, while VMware captured $1.66 billion, a 10 percent increase compared with the same period a year ago.

After the earnings call concluded Wednesday morning, EMC's stock dropped from $26.34 per share to $25.69 by midday.

PUBLISHED OCT. 21, 2015