EMC and VMware swapped executives and possibly set up a reunification effort in the years ahead.
Let's be clear: EMC owns VMware. Sure, VMware is publicly traded, but 80 percent of the company is owned by EMC. That reality really hit home as the companies swapped executives. In short, EMC's Pat Gelsinger becomes VMware's CEO. VMware CEO Paul Maritz becomes chief strategist at EMC.
If EMC and VMware weren't essentially one company with EMC CEO Joe Tucci as chairman of both this executive swap would be impossible. "We believe that today's announcement underscores the deep integration underway between EMC and VMware," said Barclays analyst Ben Reitzes.
And given Tucci will stick around through as EMC's leader through 2013, the stage is set for VMware to completely come into the fold. The CEO of a unified EMC and VMware would probably be Gelsinger.
The plotline here is fairly obvious. VMware is going to face competition from Microsoft System Center 2012 and open cloud stacks. In addition, EMC will have to offer integrated cloud systems for data centers. VMware is behind the software dominated data center and EMC's storage and big data stacks play a key role. EMC and VMware may also swap assets like Greenplum in the near future.
Wells Fargo analyst Jason Maynard connects the dots in a research note:
We wouldn’t be surprised if sometime within the next 18 months, EMC comes to the conclusion that greater synergies can be realized through the tighter integration with VMware development and distribution. It seems as if the right approach is to use VMware as the mechanism to bridge the gap to hybrid cloud environments. We think this means using virtualization as the control point for the entire infrastructure stack (compute, storage, network) alongside their cross platform data center management tools. With Pat Gelsinger at VMW we think it is likely that he will surface the logical connection points and find a way to bring this product set together. The near-term change we envision is the potential for VMware to be less focused on pushing its disruptive public cloud strategy as that revenue would not be large enough to offset threat to the core EMC business.
In other words, Gelsinger is at VMware to figure out how to integrate all the parts. From there, the EMC and VMware unification is just a math problem. How much does EMC have to pay to buy the rest of VMware it doesn't already own?