Joseph Tucci, President and CEO, EMC

Picture this: Tough-talking New Yorker Joe Tucci, president and CEO of EMC Corp. (NYSE: EMC), lying on a beach wearing a Byte Me T-shirt. Can you imagine? Check it out: He's already got the shirt (see photo, below left).

Actually, it should probably read: "Ayyy! You Wanna Piece o' Me?"

A model New Yorker, Tucci is also a no-nonsense chief executive who finds the daunting challenge of getting EMC back on track "fun."

Tucci, who isn't insane, took the job in January 2001 as the company's stock began its plunge from over $100 to below $10 a share, where it is today. The downturn in the economy and EMC's laissez faire attitude toward refreshing its technology stockpile enabled its biggest competitors Hewlett-Packard Co. (NYSE: HPQ), IBM Corp. (NYSE: IBM), and Hitachi Data Systems (HDS) – to eat its lunch. Analysts estimate EMC lost as much as 30 percent market share in high-end storage over this period (see HDS Gains on EMC and EMC Bombs Big-Time).

Now EMC has charged back with a brand-new Symmetrix, the DMX, which features a point-to-point "matrix" architecture that Hopkinton's spin doctors herald as "truly revolutionary." It's also overhauled its midrange line, the Clariion, and tapped a powerful partner, Dell Computer Corp. (Nasdaq: DELL), to resell it (see EMC Soups Up Symm, EMC and Dell Double-Down, and EMC Revs Up Clariion).EMC's leader has no illusions about the challenge he faces in regaining share, but he's well-versed in the business of managing derailed companies. Prior to joining EMC, Tucci guided Wang Global through a successful emergence from Chapter 11 bankruptcy protection. Under his leadership, Wang acquired and integrated 10 companies, and its market capitalization more than tripled. Wang was itself acquired in June 1999 by Amsterdam-based services firm Gentronics NV.

Before joining Wang in 1991, Tucci was president of U.S. information systems for Unisys Corp (NYSE: UIS). He began his career as a systems programmer at RCA Corp. and holds a bachelor's degree from Manhattan College and a master's degree in business from Columbia University.

In New York this week to finally unveil the Symmetrix DMX, Joe Tucci sat down to talk with Byte and Switch editors Jo Maitland and Todd Spangler about EMC's new lease on life.

Byte and Switch: What's the most important part of the DMX launch?

Tucci: Clearly, in 2002, 2001, we lost mind share and market share. But we still have tremendous presence, and an installed base, and 40 percent of the high-end market, and it's important to have that. We are a one-category company. Compare us to Hitachi Ltd. [NYSE: HIT; Paris: PHA]: They make elevators, VCRs, thermometers. Compare us to IBM: They have chips, software, mainframes, Linux, services. It's really important. It's a killer, but you have to have that base, and regaining the psychological barrier is incredibly important. We always had the functionality, which is why our product line held up as well as it did, and this new functionality gives me the chance to remind the world that this is not a one-dimensional company.Byte and Switch: Is the DMX fanfare also a reaffirmation that EMC is a hardware company, as you've made such a big deal about software for the past 18 months?

Tucci: Good pickup. I have reminded everyone of our strategy, and it hasn't changed at all. But today was primarily a hardware day, and that's fine, because as I've said we want 50 percent of our revenues to come from hardware, 30 percent from software, and 20 percent from services.

Byte and Switch: You make a point with the DMX line of reclaiming the hardware mantle with the biggest, fastest box, but you are still trailing Hitachi in terms of maximum capacity. How important is that?

Tucci: Not important at all. Basically, the system can do it today. It's a case of when we want to do it... but we don't talk about futures.

Byte and Switch: Have you lost any deals on this maximum-terabyte capacity question?Tucci: No... Nobody runs at maximum-terabyte capacity anyway, because performance is so bad. There's a knee in the curve. Look at Hitachi's knee in the curve versus ours; we are a lot faster. Look at the benchmarks. There are only so many drives before you kill performance. And if that's what you want, you would use Centera for massive archiving, at a fraction of the cost (see EMC Has Eyes for Huge Archives).

NEXT: Price/Performance Crunch

Byte and Switch: Will the DMX product line make up the market share you lost to Hitachi?

Tucci: This platform hits the price/performance the market wants... Certainly in 2003 we will take back share.

Byte and Switch: So was it just performance that caused Symmetrix to lose share?Tucci: It was more than performance. The back-end drives we were using were expensive... We had a four-bus structure; they had a switch.

Byte and Switch: Isn't the new Direct Matrix Architecture really just smoke and mirrors to improve your own cost base, rather than the great leap forward in technology you are claiming?

Tucci: How do you explain the tests?

Byte and Switch: Err... those would be the internal EMC benchmarks?

Tucci: We patented a switched architecture. [Ed. note: Although EMC never released a version of the Symmetrix with a switched internal architecture.] There's no way you can get a switched architecture to run this fast.Byte and Switch: So if it's so good, why haven't people gone to this architecture before?

Tucci: It's difficult.

Byte and Switch: What's difficult about it?

Tucci: To make all those connections work and not get confused.

Byte and Switch: Yes, it does seen complicated. So is the Matrix architecture the future of the Symmetrix?Tucci: There's nothing out there that's as fast as this. We already have a patent on how to improve this, but yes.

Byte and Switch: Do you think your competitors will move to this architecture?

Tucci: Sure. We have a lot of interest. Particularly from the server vendors that are interested in licensing this technology.

Byte and Switch: Interesting. How might they use it?

Tucci: With the Symm, but you should probably talk to them about it.Byte and Switch: Is EMC getting more competitive on pricing as well?

Tucci: We have been for a while, it's just that perception lags reality, but we have brought our prices down very much into line... This is just the beginning for us with this line. They [Hitachi] are now past their sweet spot. They will get faster and faster, but if you look at new architectures, the first kick is the big one.

Byte and Switch: Right. But there's nothing stopping Hitachi from designing a new architecture too, if it believes it's the right thing to do.

Tucci: I'm sure they will, but it takes five years to design a new system. It took them longer than that to copy the Symmetrix.

Byte and Switch: Ouch! Incidentally, what's the status of the lawsuit between you two? [See HP Slaps EMC With Lawsuit and EMC Nails HDS With Lawsuit.]Tucci: We won't be able to comment on that.

Byte and Switch: Was it more than a marketing tactic?

Tucci: [Smiling] Yes. They copied our technology.

Byte and Switch: But Hitachi countersued you.

Tucci: If you get a suit, there is always a countersuit. You tell me where there's not.NEXT: Why EMC Didn't Buy Precise

Byte and Switch: Let's talk about your acquisition strategy. Were you disappointed not to get your hands on Precise Software? [See Veritas Gets Precise.]

Tucci: We never did bid for Precise.

Byte and Switch: You never placed a bid for Precise?

[Ed. note: Tucci takes the conversation off the record at this point. He reminds us that a lot of people say a lot of things.]Byte and Switch: Are you interested in increasing the size of your software sales force?

Tucci: Absolutely.

Byte and Switch: Via an acquisition?

Tucci: You can count on it. But Precise wouldn't help me at all. I'm not saying it's bad technology, but if I want to get some sales and distribution capability for software, Precise would not come to my mind, would it? They sell through channels, and we are Precise's largest reseller.

Byte and Switch: Does that contract still stand, even though you compete with Veritas Software Corp. [Nasdaq: VRTS]?Tucci: We are Precise's largest reseller. You follow what I'm saying? We need the distribution capability.

Byte and Switch: Sure. So thinking about what you might pay in today's market, how do you weigh up the issue of getting what you pay for, or in simple terms, spending a big chunk for something good, versus being shrewd?

Tucci: It's not about being shrewd or not shrewd. The world has come back down to earth. The world has figured out that its nuts to give Cisco Systems Inc. [Nasdaq: CSCO] a 200 P/E. The world has figured out its nuts to give EMC a 160 P/E. This filters down; all I'm saying is that a lot of the small software companies out there still have delusions of grandeur. I'm certainly willing to pay up good value for a software company, but again, I'm going to let it trickle down. This is going to be the third year in a row of probably no growth. Maybe its flat... It's not that I'm cheap, or frugal. This is about playing games in the real world.

[Ed. note: It sounds like EMC is still searching for the right company, but would Tucci give us any hints? You gotta be kiddin' me.]

Tucci: I am expecting the market will be flat this year. That said, I am now going to take market share as I have the product portfolio to do it. EMC will grow this year, that's what I've said, as we will take market share. We will be profitable every quarter.NEXT: How Much Software Can You Stick In a Switch?

Byte and Switch: What's your take on the shift from the intelligence being in the storage array to residing in a switch on the network?

Tucci: First of all, it will never be either/or... but you're much better off with the technology working closer to the controller... Why would you want RAID there when you can do RAID so efficiently here? How much software functionality do you think you can stick in a switch? Let me ask you a question. Why did [Sun CEO Scott] McNealy's and [Oracle CEO Larry] Ellison's Network Computer never really take off?

Byte and Switch: Latency?

Tucci: No, that's not true at all. I think it's because the price of the PC collapsed so much, that what was the difference? A network PC has some intelligence in it, this and that, for $400, but you can get a full-blown PC for $600. Storage technology is so sophisticated and so intricate, and the prices are coming down all the time... We aren't going to wake up one day and find all this intelligence in the switch. That's insane. There will be some on the server, some in the network switch – which is one piece of the networking layer – and some on the array.Byte and Switch: What did you make of Brocade Communications Systems Inc.'s [Nasdaq: BRCD] acquisition of Rhapsody? [See Brocade Scoops Up Rhapsody.]

Tucci: That's fine. There will be more intelligence in the switch, and there will be functionality to go there. There's a tremendous amount of intelligence that will go into that layer, but into that layer we would include everything to do with EMC ControlCenter, everything we do in NAS. In that layer, replication will happen. Right now, we manage replication in the network but perform it in the array – that's SRDF [Symmetrix Replication Data Facility] – but what do you care? You're a user, what do you care?

Byte and Switch: What are your thoughts on the outsourcing model for storage?

Tucci: I do think bandwidth and storage are somewhat close together. Certainly there's the fixed-content market, so you could picture a company like General Electric with a huge backbone and a lot of technology, and you could picture the other side of that partnership with, say, Verizon Communications Inc. [NYSE: VZ] saying, "I'll give you bandwidth, and control the capacity a lot better." And you can see me getting a piece of that to supply the storage technology. I think the model is particularly good for fixed-content storage, but it's just emerging. I don't think companies are going to say, 'Here, Verizon, hold my fort for me.'

The big companies will do it themselves, two data centers back-to-back with a high-speed link between them. There's so many things happening in this market that, as much money as I am spending, we can't keep up, for Pete's sake. I see these other companies... the statements they make...[Ed. note: Joe shakes his head. It's tough being at the top.]

NEXT: The Competition

Byte and Switch: To what degree does EMC need to become more of a server-resident management software player?

Tucci: PowerPath. We have that today. I'll give you a little tip that no one else knows, OK? You'll see a series of [inaudible] ... We have announcement dates planned in March for [inaudible] ...

Byte and Switch: Sorry, what was that, Joe? Announcements for...?Tucci: We're doing some more high-availability software...

Byte and Switch: That's going to be server-based?

Tucci: I didn't say that. All I'm saying is, you'll have to wait and see.

Byte and Switch: Oh.

[Ed. note: And the tip was... what?]Byte and Switch: Sun Microsystems Inc. [Nasdaq: SUNW] is tying everything up in one complete management package: storage, servers, software, services. HP and IBM are going in a similar direction. How does EMC respond to that?

Tucci: And that's what customers want, right?

Byte and Switch: Well, some customers do apparently want the whole integrated package from one vendor.

[Long pause. Byte and Switch editors do the crossword puzzle.]

Byte and Switch: Well? How do you respond to a customer when they ask you about that? What's the advantage of buying my storage separately from the rest of my data center equipment?Tucci: Look at what Scott [McNealy of Sun] is doing. He's keeping up with Intel Corp. [Nasdaq: INTC] on chips, he's got Microsoft Corp. [Nasdaq: MSFT] and BEA Systems Inc. [Nasdaq: BEAS], he's got Java, Linux, Unix, and Solaris. With all that, how's he going to provide better storage software than I am, when I have a bigger market cap and more cash? And look at HP. It isn't much better: The profitability of that whole goddamn company is ink, they are doing all those things while also trying to take on IBM in services. Obviously I'm not going to knock IBM. They've got something they can pull off, and some customers will like it. They have their outsourcing business and sometimes we will work with them.

All four of the big server vendors are all selling somebody else's storage. Dell is selling ours, Sun and HP are selling Hitachi, and some of IBM's best growth is from the LSI Logic Corp.