John Katsaros

The Synthetic Mainframe Vendor

During the EMC Analyst Conference we had a session with Michael Capellas who joined VCE six months ago as Chairman and CEO — VCE is the Virtual Computing Environment company set up by Cisco, EMC and VMware. He's got a huge personality and the resume to back it — most recently he was Chairman and CEO of First Data. Before that he was head of Compaq and drove the merger with HP where he was president for awhile after which he moved on to rebuild MCI which ended up being acquired by Verizon. He's definitely what you would call an industry heavyweight. In May when it was announced that he would run the VCE coalition we pointed out in this newsletter that VCE would change to suit Capellas' goals and not the other way around and that he most likely would want to create something new and visionary in the computer business. With his credentials and capabilities it's unlikely that he took this job just to create some best practices building blocks. VCE has progressed rapidly since Capellas joined but they're still tight lipped about the long term plans. It's our guess that Capellas is building a modern mainframe company — you might want to call it a synthetic mainframe vendor since it sources key technology from other entities so that it can continuously take advantage of the best stuff that's available. Today the big three dominate the server market — HP, IBM and Dell. A year from now we may be talking about the big four.

Money burning a hole in your pocket

If that's your problem, IBM's got the answer — buy a bunch of tech companies. In the course of two weeks, IBM made three acquisitions spending in excess of $2B for Netezza, Blade Network Technologies and Open Pages. Blade makes Ethernet switching hardware and software for data centers. Open Pages focuses on compliance and risk management. And for $1.7B IBM acquired Netezza which makes data warehousing appliances for faster and more complex analytics. The current wave of acquisitions (started about the time Intel bought McAfee during the summer) continues. What fun.

Holy Cow

HP's announcement this week that it's acquiring ArcSight for $1.5B is a huge event in the infrastructure space for a number of reasons not the least of which is ArcSight's strategy. Five years ago there were 10 to 15 Security Event Management companies mostly funded by venture capital. Back then it was hard to tell the differences between these companies as they kept leapfrogging each other with new features and capabilities. Eventually ArcSight became the market leader when it re-engineered its user interface with a very graphic visualization of the network topology and the events being monitored. The company kept its leadership by continuing to enhance its value proposition by adding adjacent functionality like event correlation and compliance onto the ArcSight platform and by continuing with its direct sales model. For reasons which we may never understand, the competitors had trouble keeping up as ArcSight continued to gain market share. Cisco, IBM, Novell and EMC all made acquisitions in this space and in one way or another dropped the ball without gaining significant market share. But HP's acquisition of ArcSight is a big event for another reason - the consolidation of security. Last month it was Intel's acquisition of McAfee. This month it's HP and ArcSight. What's next? Who is next?

New kid on the bloc or the birth of a new computer company?

Last month, Cisco and EMC appointed Michael Capellas to lead the VCE coalition and named him CEO of ACADIA the Cisco-EMC joint venture with investment from Intel and VMware where he reports to Joe Tucci, John Chambers and the ACADIA board (consisting of two EMC execs and two Cisco execs plus Capellas). It's hard to imagine anyone able to have that many top level bosses but Capellas certainly isn't your average CEO. Capellas was Chairman and CEO of Compaq in 1998 leading up to its acquisition by HP where he spent time after the merger as president. After that he ran MCI during a difficult rebuilding phase. You might wonder why Capellas would take on an assignment like ACADIA - we've been told since it was formed in November 2009 that ACADIA was set up to sell Vblocks - preconfigured versions of Cisco's UCS server, EMC storage and VMware software. But maybe there's going to be more to this story than that - what might interest someone like Capellas is the launching pad to build something bigger - more than an entity selling preconfigured packages - more like a new computer company. ACADIA could be the perfect platform for doing this — with a birthright consisting of networking, server, storage, software and with Capellas as CEO can it grow quickly enough to compete with the likes of computer giants IBM and HP?

iPad Envy - - and HP?

While the swine flu epidemic was more or less a bust, iPad Envy has hit Silicon Valley in a big way. Lots of people want one but corporate affiliation may mean that if you get one you might have to keep yours in the closet. If you bought and boasted about your new Kindle in 2009, then buy one of those iPad book covers to conceal it — we don't want to hear how much you love it. If you work for any one of a long list of companies including Intel, Google and Microsoft then you can't take your iPad to work. Probably the worst case of iPad Envy may be HP which on Wednesday said it would pay $1.2 Billion to acquire Palm and subsequently went on to say that Palm's webOS was a key dealmaker cause HP needed an OS for building things like ...iPads. Since we don't know the details it's hard to say whether this will be a success or not and there seems to be a lot of value in the Palm patent portfolio. An argument can be made that HP could have been a stronger player in the mobile market if it was device agnostic and treated things like smart phones and tablets like disposable devices. However, with this acquisition we're past that point. You've got to wonder why HP would want to take on a competitor like Apple. HP's enemies list is pretty big — longstanding were IBM and Dell. More recently Cisco. Now add Apple and Google into that mix and you end up fighting battles on too many fronts. With regard to Palm, one of our readers who shall remain nameless sent in this final advice learned from the Palm debacle — for heaven's sake, don't call your hot new product the "Pixi." Blackberry, iPhone, Danger, Android — all OK names. But Pixi? That's a mistake you can't recover from.

Cisco Joins Dow

This week GM was removed from the Dow Jones industrial index and replaced by Cisco.  GM was the last automaker on the index.  Now there are five high tech companies in the Dow including HP, Intel, IBM, and Microsoft.  I guess the only surprise here is why it took so long.  Cisco has been a bellwether of high tech spending for years.

Maginot Line

Thomas Noonan (formerly CEO of ISS and now, post acquisition, is an IBM VP responsible for the security business unit) is probably a really nice guy -- at least that's what he seems like when he's delivering a keynote as he did at Interop.  The problem that we have is about some of the content.  Last time we saw him speak was a year ago at the RSA conference when he seemed to get wrapped around an urban legend.  This time he went on and on trying to draw a parallel to today's perimeter based security systems and the Maginot Line -- the massive fortifications the French built between 1930's -- 1940's which utterly failed to stop the Germans who simply moved around it.  The analogy was along the lines of "the network perimeters that enterprises have built may be of little value when facing today's threats."  That might be true, but coming from the company that was one of the leading providers of the products that helped build this perimeter defense, you have to wonder whether what they're selling now will actually be of long term value or whether it's just another defense layer that will soon become obsolete.  Maybe it's time Mr. Noonan socializes his keynotes a little bit beforehand to see if they pass the giggle test.