EMC CEO: We'll make more acquisitions in Israel

Joseph Tucci says EMC is adapting to the fast-changing computers industry through aggressive acquisitions.

"I've been in the computing business for 42 years," EMC Corporation (NYSE: CEO) Joseph Tucci told "Globes" during his first-ever trip to Israel. "There were dozens of large companies in the mainframe business, but only IBM survives. Once, there were great companies that have ceased to be relevant."

Tucci announced that he will resign his post in late 2012, a little more than ten years after taking the helm, and serve as chairman of the data disaster recovery company. While no more than a minor tremor on the scale of shocks in the computing industry, it is a milestone for EMC, the leader in its field.

Tucci is leaving his post just when the industry is going through a great change, but EMC is dealing with more than the move by a dominant CEO. A successor, who will probably come from within EMC's ranks, will be needed to deal with a turning point in the computing industry, and the company will probably have to deal with the possible departure of disappointed executives.

"I am not completely leaving, since I'll be executive chairman, and we have people ready on whom I rely," says Tucci. "In truth, there is no perfect way to make such a change. There's a big change underway in the industry, and there will be new opportunities for people at the company."

Tucci is visiting Israel as part of the celebrations marking the opening of EMC's new development center in the country. He will meet President Shimon Peres, EMC Israel employees and customers, and Prof. Manuel Trajtenberg in his capacity of chairman of the Council of Higher Education in Israel's planning and budget committee.

EMC has 1,000 employees in Israel, mostly at its center of excellence, run by Dr. Orna Berry. It seems that after the acquisition of five Israeli companies, on top of organic growth, EMC is now a serial buyer. "I am sure that we will make more acquisitions in Israel, just as I'm sure as I am sitting here," Tucci says.

The main challenge Tucci faced when he took up the CEO's job was to provide customers with inexpensive and simple solutions. A key long-term challenge was the spread of software-based solutions that replaced hardware-based ones. In response, EMC launched an acquisitions campaign, which began with Documentum in 2003 and VMware Inc. (NYSE: VMW) in 2004. The company has spent $14 billion on acquisitions since 2003.

EMC has also spent $11 billion on R&D since 2003. The result was a tripling of revenue, which is expected to top $20 billion in 2011. En route, EMC acquired computer infrastructure, information security, data management, and end-consumer solutions companies.

Tucci says, "The companies that lost in the early rounds of computing changes were too defensive to the challenges that emerged. Offensives will affect who will win in the current round. The most aggressive will win."

This attitude may explain why the multiples of data storage companies appear to have come from another world. For example, last year, EMC acquired Isilon, which had just $130 million in sales, for $2.2 billion.

"I don’t like paying a lot, but we got excellent returns on these acquisitions over the years," says Tucci.

Of the 50 acquisitions that EMC has made since 2003, it seems that VMware, a provider of mediation layers that run multiple servers on one hardware system (virtualization), provided EMC with the highest return. EMC paid $600 million for VMware in 2004, and floated the company in 2007 at a value of $10 billion, while keeping an 80% stake in it.

"When we bought it, I believed that this would be a company that would reach a value of many billions of dollars," says Tucci.

The switch to consuming data from the internet instead of the PC presents EMC with new challenges. IDC estimates that the digital universe will grow 44-fold between 2010 and 2020, creating a worthy growth engine for data storage companies. Most of this space comes from new types of data, such as social networks, video, and multimedia.

EMC responded to the challenge of coping with the ever-growing quantities of data and the analysis of big data by acquiring enterprise data warehouses. "The models of databases will change," says Tucci, adding that the company would probably not enter the enterprise database market.

EMC has acquired five Israeli companies: Kashya for $155 million, nLayers for $50 million, and proActivity for $30 million, all in 2006; Illuminator for $10 million in 2007; and database organization company ZettaPoint Inc for $10 million in 2011. It also acquired RSA Security Inc., which earlier acquired Cyota, for $145 million in 2006.

Published by Globes [online], Israel business news - www.globes-online.com - on December 7, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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