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July 26, 2012

VMware Denies Spinoff Rumors As It Strengthens Cloud Hand

Robert Gelber

Last week, HPC in the Cloud reported on a couple of executive turnovers in Silicon Valley. To recap, VMware traded CEO Paul Maritz to parent company EMC in exchange for Pat Gelsinger. While the boardroom swap is official, rumors of possible spin-off company are still unconfirmed.

GigaOm wrote a couple weeks back that a new company with a cloud, big data and analytics focus was likely to emerge. The new entity would consist of VMware’s Cloud Foundry, EMC’S Greenplum and project Rubicon, a joint VMware and EMC venture. Rubicon would serve as the infrastructure (IaaS), Cloud Foundry as the platform (PaaS) and Greenplum would perform big data analytics.

Last week, VMware officially denied these rumors in an internal memo obtained by CRN, which stated:

The speculation about EMC and VMware’s commitment to Cloud Foundry and GreenPlum businesses are unfounded. VMware and EMC are very committed to these efforts and are continuing to aggressively invest in their success and long term contribution to the portfolio.

The statement was rather general and seemed to have an opposite effect than was intended. In the same CRN article, which released the memo, an anonymous VMware partner told the publication that further spin-off plans would be put on hold “until the dust settles.” GigaOm also defended their stance in an article titled VMware’s non-denial denial on CloudFoundry spin-off, stating that a VMware, EMC owned company would only affirm the companies’ commitments to their cloud and analytics assets.

The VMware saga went through another development, as the company announced on Tuesday it was buying Nicira for $1.26 billion in cash and equity. The newly acquired company creates software that abstracts hardware resources. The offering gives users the ability to create a virtual datacenter with isolated storage, compute, security and networking resources. The official statement said of Nicira’s product: “This is what the software-defined datacenter is all about, and it is the architecture for the cloud.”

The acquisition poses a threat to traditional networking companies, like Cisco and Juniper. By enabling virtual networks, Nicira technology reduces the need for physical gear, such as routers and switches. Indeed, Cisco shares fell after the announcement. It’s also worth mentioning that Nicira is an OpenStack contributor, which could create a conflict of interest, given VMware’s vCloud is a closed-source product.

VMware appears to be rethinking its walled-garden approach, however. VMware Chief Technology Officer Steve Herrod has indicated that Nicira will play a role in their open source cloud offering Cloud Foundry. And let’s not forget VMware’s purchase of DynamicOps earlier in the month. The Massachusetts-based software company automates the provisioning and management of IT services across heterogeneous cloud environments. This means it works not only with VMware’s products, but with competing solutions like Microsoft’s Hyper-V, Xen-based hypervisors and Amazon’s EC2.

It’s easy to see how VMware’s denial has not quelled rumors. Together with EMC and these latest acquisitions, they have the makings of an end-to-end cloud service, enabling them to go head to head against Amazon, Microsoft and other cloud players.

According to CRN‘s anonymous tipster, a spin-off would be beneficial, as it would create more autonomy. But it all depends on the company’s structure moving forward. “I would bet [the spin-off] resurfaces in three to six months,” said the source.