Cisco began “limited restructuring” this week by laying off approximately 500 employees globally, including two of the four -person team manning the Cisco/EMC alliance, a source tells us.
Ties between Cisco and EMC had been visibly strained since VMware — a company owned by EMC — acquired network virtualization provider, Nicira Networks Inc. last summer. While Cisco had historically been an ally with VMware and EMC, EMC/VMware’s acquisition of Nicira’s network virtualization left a bad taste in Cisco’s mouth.
Another indication of the souring relationship between Cisco and EMC this week is a rumor that EMC will start selling its own white labeled servers, putting it into another field of competition with Cisco — a rumor unconfirmed by Cisco.
While Cisco’s actions this week may point to a souring Cisco/EMC relationship, it could also indicate Cisco’s ongoing shift toward focusing on software and cloud initiatives. As demand increases for software-defined networking (SDN) and network virtualization solutions, Cisco could feel pressure on its traditionally robust hardware profit margins — an industry trend that is apparently on the minds of Cisco execs as the company works to realign operations.
“We routinely review our business to determine where we need to align investments based on growth opportunities…These actions are subject to local legal requirements, including consultation, where required,” said Cisco spokesperson Robyn Jenkins Blum, Cisco Corporate Public Relations in an email response.