The VAR Guy

Is Cisco Systems committed to VCE (the Virtual Computing Environment Company)? The answer appears to be “absolutely yes,” based on a recent Cisco SEC filing plus chatter from Cisco Global Channel Chief Edison Peres. Here’s the update.

VCE — funded by Cisco, EMC, VMware and Intel — promotes Vblock infrastructure platforms to channel partners. The VCE effort apparently hit a few bumps and suffered some staff cuts in August 2011.

But now there are signs of progress — and indications of continued commitment from Cisco and EMC, which are VCE’s two biggest financial backers. In a Sept. 14 filing with the SEC, Cisco offered this update on its VCE commitments:

As of July 30, 2011, our cumulative investment in the combined VCE entity was approximately $100 million and we owned approximately 35% of the outstanding equity. We account for our investment in VCE under the equity method, and accordingly our carrying value in VCE has been reduced by $79 million, which reflects our cumulative share of VCE’s losses primarily in fiscal 2011. Over the next 12 months, as VCE scales its operations, we expect that we will make additional investments in VCE and may incur additional losses, in proportion to our ownership percentage.

Translation: Cisco is losing money on VCE, but the networking giant expects to make continued VCE investments because the effort helps to drive Cisco’s unified computing business. EMC has previously made similar statements in its SEC filings. Side note: It’s difficult for The VAR Guy to say how much money Cisco and EMC ultimately lose (or gain) from VCE; the companies disclose how much they’re pumping into VCE but don’t really disclose how those dollars impact overall Vblock sales.

VCE Milestones

Meanwhile, VCE unveiled new partner initiatives during a worldwide partner town hall on Oct. 4. VCE President Frank Hauck, Cisco Senior VP Edison Peres, and additional VCE executives were on hand to describe three partner milestones:

• A standardized order process, involving distribution partners, for Vblock Infrastructure Platforms.
• The training of more than 1600 partner employees on VCE  solutions so far in 2011.
• The opening of a new VCE Solutions Center in Marlborough, Mass. Partners can collaborate with developers and customers in the solutions center, VCE said.

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