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By | Chris Mellor 8th August 2011 10:35

Vblocks bleed out EMC money

VCE = virtual cash erosion

VCE – the Cisco-EMC-VMware Vblock company – appears to be experiencing virtual cash erosion, with EMC reporting $132m of accumulated losses.

Vblocks are converged IT stacks composed of EMC storage, Cisco UCS servers and networking, and VMware server virtualisation software. The VCE concern was set up by Cisco, EMC and VMware to build the Vblocks, and EMC owns 58 per cent of VCE, giving it the controlling interest.

Thanks to Aaron Rakers of Stifel Nicolaus, we know that EMC's 10-Q SEC filing says total EMC-contributed funding to VCE is $173.5m, plus $7.8m in stock-based compensation for VCE executives such as CEO Michael Capellas.

EMC losses in VCE for the June quarter of this year were $46.6m, with $41.9m in the preceding March quarter.

Viewing VCE as a startup it has not been very successful thus far. If it doesn't make a profit by the end of this year then perhaps EMC, Cisco and VMware might reconsider things. Perhaps they should change from stock-based compensation to stick-based incentivisation? ®

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