EMC: A reporter’s notebook

It is my first International Press Day for EMC Corp. I am one of three Canadian journalists sprinkled amongst 81 others from various parts such as England, Italy, Australia, and the countries of Asia Pacific.

The event is taking place in the Boston suburb of Hopkinton. Boston is one of my favourite

cities in America. In fact, if I had to live in the U.S., Boston would only rival San Francisco. No other city comes third. OK enough about me. The following is a timeline of two days spent with EMC.

Day One

8:44 AM: Drive into Hopkinton, passing at least six EMC buildings before we reach are final destination. According to Kristen Karapetian, one of our chaperones on this junket, EMC has more than 20 offices in the greater New England area.

8:58 AM: Jennifer Dreyer, the head of public relations at EMC welcomes us to the company’s third International Press day. I am hoping we get a briefing on VMWare, a company EMC acquired about 18 months ago. Sure enough, Dreyer announces it will be the last briefing of the day.

9:05 AM: David Goulden, the executive vice-president of customer operations for EMC, starts the morning session with a financial overview of the company’s recent acquisitions. Believe it or not, EMC was at one time a single product company with its Symmetrix line. During the last nine years, it spent more than US$2 billion on acquisitions, including Data General, McData, Conley Corp and FilePool.

I wonder if anyone remembers Data General’s old advertising campaign: “Server in a pizza box”? In the past 18 months, EMC has made five acquisitions to position themselves in the hot information lifecycle management (ILM) space. The most notable buy was Legato.

During the bubble years of 2000 and 2002 and just after the company’s most important acquisition of Data General, EMC along with the market, nose-dived. For the first time in its history EMC posted two losing years, Goulden said.

With the hiring of Joe Tucci (more on him later) as the CEO, the company decided to reinvent itself and started spending more money in R&D to spread out its product from high-end to mid and eventually even in the low end. The company has since returned to profitability and in 2006 Goulden said the firm will spend US$1.1 billion on R&D to stay ahead of any technology curves.

I have to say spending money, while in a recession is probably the right thing to do, but it comes with huge risk and is very unpopular with shareholders. But, if you remember what Intel’s Andy Grove said: “You spend you way out of a recession.”

10:01 AM: Mark Lewis is chief development officer and used to run EMC’s software group. His new role, only a month old, is to focus on integration of hardware and software solutions for the ILM market.

10:15 AM: Barton Chui of the Hong Kong Economic Times, the reporter sitting next to me in the front row falls asleep. I have never seen this happen before in my 15 years reporting on IT. To be fair, he had a transatlantic flight and must be totally exhausted.

10:16 AM: Lewis reiterates that EMC will spend US$1.1 billion in R&D. “We are a technology company. We are not a storage company anymore,” he said.

Lewis adds that the company wants to spend the money wisely and in key areas such as ILM.

Lewis also tries to address that in no way shape or form is IT or storage commoditizing or becoming a cheap utility. This statement is contrary to what IBM believes will happen with utility computing being the same as gas, hydro and water.“It is like running on a treadmill,” he said. “This is not an industry that is static and therefore not commoditizing.”

10: 57 AM: Bill Teuber is EMC’s CFO also known as the money guy. Teuber reveals that EMC is buying back a lot of its stock. In fact, by buying back its own stock it helped the company pay for the VMWare acquisition, he said.

The reason for the buying back stock is so shareholders can get a better return on investment over dividends. It also helps with tax issues, he said.

Teuber also relayed a funny story about how prevalent compliance is worldwide. He was asked to speak about compliance in India on a Friday night. He thought no one would show up. Instead 250 people packed his meeting room. “”It is sweeping the world. Why would anyone want to hear about compliance on a Friday night anywhere?”” he said.

Teuber also revealed the company goals, and they are very simple: To take more share from competitors.

During Teuber’s Q&A journalists peppered him with acquisition questions. It still puzzles me when journalists keep asking executives if they want to continue their acquisition strategy and which companies they want to target. During this press day even non English-speaking reporters asked this question, which needed to be translated for Teuber. As a CFO, Teuber simply can’t answer this question without a) putting his company behind the 8-ball in getting a good price for a company, b) getting fired for stupidity in revealing his strategy to worldwide press; and c) risking imprisonment for maybe violating SEC safe harbour agreements. Executives who rise through the ranks to become CFO are typically not dumb to reveal much of their acquisition strategy. So please stop asking these questions. It just wastes time.

Teuber did, however, answer my question about comparing EMC’s acquisition strategy over the past ten years with Cisco, which is probably the most aggressive company in high tech for acquisitions.

He said Cisco’s good investor reputation is something to strive for, and added that the two companies were very different. EMC’s main focus was on mid-range acquisitions, he said.

As he was leaving he stopped to clarify that EMC’s R&D spend is not more than a billion dollars, but will be around a billion dollars.

11:45 AM: Dreyer announces it is time for lunch.

12:45 PM: We board the shuttle van and travel down the road to EMC’s network operation centre where the Canadians, the Koreans and Brazilians get a tour of the facility. Paul Brassil, director, hosting operations, global solutions group for EMC, hosts the tour. The facility is 10,000 sq. ft. and is more of showcase than a hosting environment. The company does have 35 customers it hosts such as Colgate Palmolive, MGM, Boston Symphony Orchestra and Burger King. Brassil conducts more than 200 tours a year and channel partners can do proof of concept for customers at this facility.

It is here I meet Nicole Lee, a translator for the Korean contingent. She asked the three Canadian journalists how to best translate “server pools.” We suggest she say “a grouping of servers.” She believes it will work.

1:45 PM: We get back to the EMC briefing centre for the big Q&A with the company’s chief executive and Chui is still sleeping.

2:04 PM: Joe Tucci, president and CEO is late for his Q&A. Chui wakes up from his nap. Tucci became president in 2000 and led a successful turnaround. About 40 to 50 per cent of his time his spent, he said, meeting with customers and journalists around the world.

Tucci said he sleeps very well, which is a standard CEO line, when asked what keeps him up at night. The company is growing in double digits in all areas across all the geographies so if any one should sleep well its him.

I ask him about channel plans and I was not surprised to hear him say EMC still supports the direct sales model. However, he did say that the company has to get better at partnering and it is where the company is headed, especially in the commercial and SMB markets.

You could tell Tucci was having a lot of fun answering the questions – even the ones that needed translation. But one question puzzled him, on the Sun acquisition of StorageTek, which is basically a tape company. He said he wanted to be kind, but “there is no money in tape anymore,” he said.

He also talked about Symantec/Veritas, ILM, growing worldwide markets, the five-year agreement with Dell, if EMC should enter the home market, why the company did not make 2.5-inch drives and if his company was ever arrogant.

I happened to have the last question, so I asked him his thoughts on the Canadian market. He said he loves Canadians and that the country has a tremendous amount of small business. He also liked the way the economy was going.

3:05 PM: Tucci thanks everyone and tells the gathering how important journalists are in terms of EMC’s international business. Then leaves for Darrel James, senior vice-president, technology solutions for EMC, who has an embargoed announcement. Since the embargo ended on June 20, I can report that EMC’s consulting services will be branded EMC Consulting.

3:32 PM: Brian Byun, the vice-president of strategic alliances for VMWare begins his presentation.

VMWare has interested me and our audience for awhile. I learned that the company was started seven years ago as a research project out of Stanford University. Today, the company has more than 1,000 employees and approximately three million individual users.

The good news is that they are total channel friendly. The company has more than 1,800 channel partners worldwide.

VMWare is a solution for Intel and AMD-based PCs and servers. It is a layer of software that pretends there are multiple computers. For example, Byun said, a PC or server will be able to run multiple copies of Windows, Linux, NetWare or Solaris with VMWare products.

3:58 PM: Day one is over and we make the 40 plus minute drive back to Boston.

Day Two

8:47 AM: Dennis Hoffman, vice-president, product marketing for EMC Software comes on to tell us that EMC lost well over US$600 million a few years ago and then told us how Tucci returned the company to profitability. I found it shocking that he would start his presentation this way.

He then went on to say how customers told him EMC was creating a lot of the problems they had. Another strange comment because he never revealed what the problems were.

Hoffman went on to say that many people feel they are dealing with Dr. No. “When ever they ask for certain IT solutions they are told “”No.””” He said, EMC is trying to bring out Dr. Yes with its new storage virtualization platform called Invista.

9:34 AM: Roy Sanford, vice-president, Centera markets and alliances for EMC, comes on to gives us another non disclosure announcement regarding EMC’s Centera line. He asked the press to raise their hands if they ever heard of Centera. Only a third of the audience puts up their hands. So Sanford decides to give a brief overview of Centera. If everyone put up his or her hands up I wonder if Sanford would have continued with his presentation?

Again, since the embargo date was June 20, I can report that EMC made software enhancements that aim to expand Centera’s content addressed storage systems. This move may help customers with new virtual pooling and remote replication software.

10:04 AM: Dave Donatelli, executive vice-president, storage platforms operations for EMC, addresses the media.

He announces that he wants to make his presentation as informal as possible. He goes into a history lesson of EMC’s product line up made up of Clariion, Symmetrix and Celerra. Amazingly, the company evolved into real broad range of products too many to name here. They also went into the tape business through a partnership with ADIC, even though Tucci said yesterday tape was a no growth business.

Since Donatelli wanted an informal presentation, I raised my hand to ask why sell tape if there’s no money it in?

Donatelli’s answer: There is no growth in tape. However, EMC does not design tape products. It just resells someone else’s tape. EMC wants to provide complete solutions and there is still tape out there. Also certain customers need tape so EMC has to offer tape even though there is no money in the tape business.

10:45 AM: Zeljko Kaurin, director of IT operations at the ING Direct Bank talks about their EMC implementation.

10:50 AM: I have to slip out of this presentation to file my story for ITBusiness.ca.

11:15 AM: Tom Prigmore, a senior analyst for Boston-based Enterprise Strategy Group, says ILM is huge and in its initial phase.

He also said analysts are skeptics and do not believe what vendors say. “We look to uncover their lies,” Prigmore said, endearing himself to the crowd.

He does say something that I think is very important and that is early adopters of ILM will be hard pressed to deploy any form of the solution without network based intelligence. This is where I believe the channel has to play a role. The first step will be committing themselves to ILM, which means investing in training and education of their staff and developing a practice around this hot market.

Prigmore added that ILM is just getting started. There are only a few of these applications ready from vendors. He believes it will take approximately 36 months for vendors to bring them out and customers/resellers to implement them.

He thinks this will happen because the customers want to wait until some of the software licenses expire. He’s probably right.

11:40 AM: Time for a quick lunch and a ride to Logan airport for the flight home to Toronto. For my first International Press Day I have to say it was quite enjoyable.

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