October 22, 2014 / 1:10 PM / 6 years ago

UPDATE 1-EMC to buy much of Cisco's stake in joint venture VCE

(Changes source, adds details, analyst comment)

Oct 22 (Reuters) - Data storage products maker EMC Corp said it will buy much of Cisco System Inc’s stake in their joint venture VCE for an undisclosed sum.

VCE, set up in 2009 as a one-stop shop for data centers, bundles Cisco’s networking equipment and servers with EMC’s storage gear and software from EMC’s virtualization software unit VMware Inc.

Reports of EMC and Cisco encroaching on each other’s turfs had sparked speculation that the partnership was fraying. Cisco, which had a 35 percent stake in the joint venture, will retain a 10 percent stake in VCE.

EMC said it will merge VCE into its business, but this will have no impact on its 2014 results.

“We view the Cisco/VCE news as a ‘yawner’ given that EMC right now is facing a plethora of growth and strategic challenges and the last thing on investors’ minds is the future of VCE,” FBR Capital Markets analyst Daniel Ives wrote in a note to clients.

Activist investor Elliott Management has been pushing hard for EMC to pursue merger or spinoff opportunities.

Paul Singer, another activist investor, asked the company earlier this month to separate its VMware subsidiary.

EMC, which cut its full-year profit forecast on Wednesday, had contributed $1.26 billion in funding to VCE since inception and owned about 58 percent of the joint venture as of June 30.

EMC’s plan to buy Cisco’s stake in VCE was first reported by Bloomberg on Tuesday. (Reporting By Kanika Sikka and Supantha Mukherjee in Bangalore; Editing by Feroze Jamal)

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