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EMC CEO Says VMware-Nicira Deal Put Strain on Cisco Alliance

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Nov. 12 (Bloomberg) -- EMC Corp. Chief Executive Officer Joseph Tucci said the purchase of Nicira Inc. by EMC’s majority-owned VMware Inc. put some stress on his company’s relationship with Cisco Systems Inc., though they will remain partners.

VMware agreed to purchase Nicira for $1.26 billion in July, gaining technology that runs networking equipment more efficiently using software. Cisco, the world’s biggest maker of computer-networking gear, is investing in that market as growth slows for traditional switches and routers.

The deal put EMC and Cisco on a collision course in next-generation networking, even as the two work together to offer communications and storage gear to customers. While they’ll compete in so-called software-defined networking, large companies still need the products and services that both EMC and Cisco offer, along with virtualization technology from VMware, Tucci said today at the Techonomy Conference in Tucson, Arizona.

“Cisco is our closest and most strategic partner, and we’ll have a long, prosperous relationship,” Tucci said. The Nicira deal put “a little stress on the relationship,” he said.

When asked when EMC would fully spin out VMware into a separate company, Tucci said, “never.”

EMC, based in Hopkinton, Massachusetts, slipped less than 1 percent to $24.10 at the close in New York. Cisco, based in San Jose, California, rose less than 1 percent to $16.86.

Separately, Tucci said he’s spending a lot of time talking to legislators and consumers about macroeconomic issues, leaving more company operations to senior executives. Avoiding the so-called fiscal cliff would create a prosperous 2013, while failure to do so would probably lead to a recession, he said. The fiscal cliff threatens to trigger $607 billion in tax increases and spending cuts starting in January if U.S. lawmakers don’t come to an agreement.

“We need to raise revenue and we need to balance the budget over time,” Tucci said. “How we do that has got to be a compromise.”

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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