One thing about Joe Tucci that I’ve come to admire in my interactions with him is his competitiveness.
Joe Tucci is a competitor. EMC is a company that keeps on reinventing themselves and making the right moves at the right time. Now he is finding the silver lining in his portfolio and creating another VMware – it’s called Pivotal Initiative.
Today in New York City, top industry analysts from Wall Street to Silicon Valley are with EMC and VMware executives to hear the plans for EMC and VMware. The news is that VMware will be forming a new startup called Pivotal Initiative. According to SiliconANGLE sources, EMC will own 69 percent and VMware will own 31 percent, and the venture will have 1,250 employees.
Wikibon analyst and Cube co-host Dave Vellante is on the ground with Joe Tucci, Pat Gelsinger, Paul Maritz, Carl Eschenbach, and the entire EMC VMware team.
A pivotal focus on Big, Fast Data
Vellante was saying on Twitter (@dvellante) that the focus is on big, fast data. EMC gets the biggest ownership position because they are putting in most of the cash investment. VMware gets preferred shares, a board seat and the right to participate in following rounds. VMware is transferring 500 employees as part of the deal. Greenplum and Pivotal are contributing approximately 750 employees. We covered the recent change in the CMO position here with our Breaking Analysis – we predicted this shift in resources was coming.
I was commenting last night on my Twitter stream that big companies fail when they miss big shifts. In fact, Pat Gelsinger himself said to me on theCUBE (link of video clip is here) that if a big company doesn’t get out in front of the next big wave, they become driftwood.
He is taking the growth assets that are losing money and shifting it out of VMware and creating a high value asset called Pivotal Initiative. This is the next big wave. It’s been called DevOps, CloudOps, DataOps, – infrastructure as code, or data as code. We define it as Software-led infrastucture and Big Data.
Bottom line: a new software industry is forming right in front of our eyes around big data, mobile, and cloud.
This move by EMC is all about this modern era of infrastructure meeting new software paradigms. Pat Gelinger, Paul Maritz, and Joe Tucci get it, and so do their teams. Question is, will Wall Street? Will EMC, VMware, and Pivotal execute?
The upshot for VMware and Gelsinger is about one word: Focus. VMware can now focus on winning Software-led infrastructure, as I laid out in earlier posts here and here. The stakes are high for VMware — that is, it must convert its leadership position in the enterprise to have a leading position in the always “shifting,” new software-led infrastructure industry. Additionally VMware is taking the operating loss from Pivotal off the books. VMware is already raising guidance on 2013 operating margins while giving up only small chunks of revenue. Stock is surging as a result.
My ANGLE and Summary
EMC and VMware are taking money, losing assets and putting them under Paul Maritz as a $300 million startup, and then throwing in Greenplum, Pivotal Labs, Cloud Foundry, Spring, and Cetas — BOOM! Instant “gold-plated startup.” Or better yet, this is the silver-lining in the asset that has been VMware.
Joe Tucci and team are isolating and carving out the future value. It’s a brilliant value creation story for all participants.
VMware off loads a high growth money losing operation to a new fully funded startup with $300m in revenue and takes its IPO as the new venture Pivotal Initiative starts producing positive net income.
Covering the technology business is fun, but it’s rare to see bold moves like this, especially moves that create large value for all players involved. I really don’t’ see anyone losing in this corporate move. The market gets better product competition, shareholders from all sides win, employees get an exciting ride in a NewCo, and capital markets get some solid action.
Update: Breaking Analysis from Wikibon.org analyst Stu Miniman