Wall Street Chatter about Cisco-EMC Deal

Wall Street traders were buzzing yesterday about a deal that could have huge implications for the future of the data center industry. No, not the apparently revived Microsoft-Yahoo deal, which in its rumored form might have little impact on the data center operations of the two companies.

We're talking about yesterday speculation that Cisco (CSCO) might consider acquiring EMC Corp. (EMC), creating a colossus with market leading positions in networking, enterprise storage and virtualization. Let's be clear up front: there's no evidence that Cisco and EMC have been talking with one another. The latest chatter was driven by an article in Barron's over the weekend in which Paul Wick, manager of the Seligman Communications and Information Fund, outlines the rationales for a Cisco-EMC combination. That was enough to boost shares of EMC, which gained 25 cents to close at $17.97 yesterday, building on strong gains from last week.

Barron's West Coast editor Eric Savitz, speaking yesterday in a video interview on Tech Ticker, said EMC's networking storage business and majority ownership of virtualization market leader VMWare (VMW) and software units such as RSA Security would help Cisco make a big step beyond its core networking communications business.

It's an intriguing prospect given Cisco's recent Data Center 3.0 push, in which the company seeks to place its Nexus 7000 and Nexus 5000 switches at the center of a unified fabric managing virtualized next-generation data centers. Integrating storage networking with other network data is a key goal of the Data Center 3.0 roadmap, and Cisco already owns a stake in VMware.