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Cisco and EMC plan partnership, not merger

Tech heavyweights Cisco Systems Inc and EMC Corp dampened speculation of a merger as they unveiled a partnership to take on rivals Hewlett-Packard Co and IBM.

The companies have spent three years developing technology and ironing out the details of a deep partnership through which they will bundle Cisco's networking equipment and server computers with EMC's storage and virtualization technology.

Their goal is to become a top provider of data center products as the industry switches to “cloud” computing services, where data is stored on central servers that can be accessed over the Internet and corporate networks.

Cisco and EMC also announced a joint venture with Intel Corp called Acadia that will offer to help build and run some data center systems for companies.

As they announced that partnership on Tuesday, top executives from both companies suggested that persistent speculation that Cisco plans to acquire EMC was unfounded.

EMC Chief Executive Joe Tucci said in an interview that the rumors may have been sparked as investors got wind of the close talks between the two companies that led to the partnership over the past few years.

Cisco CEO John Chambers said in the same interview: “Our tendencies are to partner together. I think we do that remarkably well.”

When specifically asked if he was interested in buying EMC, as investors have long speculated might be the case, Chambers said: “You buy big-to-small. You partner big-to-big.”

Cisco and EMC will sell pre-configured infrastructure packages designed to make it faster for companies to build out their data centers under a new brand, dubbed Vblock.

They are designed for large corporations to buy hundreds of server computers at once. They use virtualization technology from EMC's VMware Inc subsidiary, which enables companies to run multiple “virtual” machines on a single server computer.

Only a small number of corporations are interested in buying 300 or more servers at once, the minimum that the partnership will sell, said Gartner analyst Tom Bittman.

“This is a good offering. It's an important offering, but it's a limited market,” he said.

The companies may eventually offer smaller blocks of servers, expanding their market opportunity, he added.

They will establish one sales, professional services and support team for their products.

Six systems integrators will initially help sell the Cisco- EMC products: Accenture Plc, Capgemini, Computer Sciences Corp, Lockheed Martin Corp, Tata Consulting Services and Wipro Ltd.

Besides HP and IBM, other competitors include Dell Inc and Sun Microsystems Inc, which Oracle Corp is buying for some $7 billion.

Enterprise Strategy Group analyst Mark Bowker said some competitors have already started blogging and tweeting about the new competition in an attempt to downplay its importance.

“That's a sign the impact on the market is significant,” he added. (Reuters)