2nd UPDATE: Cisco, EMC, VMware Unveil Joint Venture

The joint venture, called Acadia, will help sell and provide support to large businesses and cloud service providers for the new product, named V-Block, combining EMC's storage equipment, Cisco's virtualized servers and networking gear, and VMware's virtualization technology.

The actual cloud infrastructure will be constructed by a coalition of the three companies, called the Virtual Computing Environment. In addition to the joint venture, the companies plan to continue to sell the product through their existing channel partners.

Seeking growth in a stagnating IT spending environment, technology giants have breached new markets, turning once stalwart allies into competitors. The partnership of Cisco, EMC and VMware comes amid a wave of consolidation among companies that provide hardware, software and services to corporate data centers.

Following the actions of International Business Machines Corp. (IBM) and Hewlett-Packard Co. (HPQ) to create one-stop IT shops, Dell Inc. (DELL) announced in September it will purchase IT services firm Perot Systems Corp. ( PER). Software giant Oracle Corp. (ORCL), meanwhile, is awaiting European antitrust approval for its acquisition of Sun Microsystems Inc. (JAVA).

Cisco Chief Executive John Chambers said during a Web presentation to discuss the partnership that while most strategic coalitions have a high failure rate, Cisco and EMC "have a very high ability to do this," based on trust and a shared vision of where the market is going.

Cisco and EMC currently have an alliance to collaborate around Cisco's next- generation data center platform, the Cisco Unified Computing System, which will be a component of V-Block. EMC owns nearly 85% of VMware.

The integrated V-Block product will not end the three companies' practices of selling individual products in partnerships with other tech firms.

"We are adding to the options that customers have; we are not removing the options that customers have," VMware Chief Executive Paul Maritz said.

EMC Chief Executive Joe Tucci stressed that the Acadia joint venture is not a move by the three companies into the outsourcing business. While Acadia will offer support services, the coalition will continue to work with other service providers that offer IT management.

The partnership between the three companies primarily targets what they call the "private cloud," an offshoot of one of the biggest trends in technology, cloud computing. Private clouds are designed to grab some of the cost savings inherent in cloud computing, while allowing customers to maintain control over their IT infrastructure.

Using V-Blocks, customers can decide what IT chores to run on their private clouds while sending others to be completed by a cloud service provider.

"This coalition is about more than technology and partnership," Chambers said. "It is about an entirely new and unique approach to the data center that improves utilization, power consumption and security of information."

VMware and chip maker Intel Corp. (INTC) are currently minority investors in the Acadia venture. The new company, expected to begin operations in early 2010, will have approximately 130 employees.

"We are moving our top talent from both organizations into this," Chambers said. EMC and Cisco are still searching for a chief executive for the new venture.

The coalition should do a lot to accelerate the adoption of cloud computing because the companies take out the complexities of creating the necessary infrastructure, said Zeus Kerravala, an analyst at Yankee Group.

"The appeal is that someone can buy a prepackaged cloud computing system instead of assembling one themselves," Kerravala said. "It's better to buy the whole car than just the components." But even with the backing of three major tech players, there likely won't be a lot of early takers as companies get their feet wet in the cloud concept, he said.

Cisco shares slipped 18 cents to $22.82; EMC fell 4 cents to $16.39; and VMware added 45 cents to $38.90.

-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@ dowjones.com

(Roger Cheng contributed to this report.)

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  11-03-091352ET
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