It has been a ridiculously busy week for EMC—and for everyone else, it seems. For starters, the Hopkinton, MA-based data storage giant (NYSE: EMC) announced record quarterly revenues for the third quarter of 2010. Yesterday the firm hosted its fourth annual innovation conference from its center in Cork, Ireland—which amounted to a company-wide session on strategy and research, the largest of these gatherings to date, involving 15 EMC facilities worldwide. And in other news, the rumor mill has been buzzing with talk about EMC being a possible acquirer of Seattle-based storage firm Isilon Systems (NASDAQ: ISLN), in a deal that reportedly could be worth upward of $2 billion.

Amid all this activity, EMC chief technology officer Jeff Nick took some time to talk with me last week about the company’s broader innovation strategy—tackling aspects that are internally and externally focused, home-grown and acquisition-based. Like IBM (NYSE: IBM), one of its main competitors, EMC is known as an aggressive acquirer of companies, using new businesses to further its technology and attack new markets—witness its recent purchases of Mozy, Greenplum, and Data Domain. But it’s also known for pursuing some pretty interesting in-house initiatives aimed at turning cutting-edge research into technologies and services that its product groups can use.

Unlike big tech companies such as IBM and Microsoft (NASDAQ: MSFT), EMC doesn’t have a big traditional research organization charged with advancing the state of the art in technology. Instead, EMC pursues more of a virtual model—an “innovation network” (run by Burt Kaliski, formerly of RSA) that consists of virtual centers as well as a few physical research facilities, and collaborations and partnerships with academic researchers at places like MIT, Harvard University, Carnegie Mellon University, Stanford University, University of Michigan, and Tsinghua University in Beijing. The topics of its R&D projects include things like scalable file systems, Internet cloud security, and data availability on peer-to-peer networks.

In our recent chat, Nick didn’t deviate too much from his message about EMC’s innovation network and conference, but I did get him to open up a little about how the firm balances its in-house R&D with its acquisition efforts, how it works with and thinks about startups and smaller businesses, … Next Page »

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The “two guys in a garage” story of how technology companies get started is a powerful one in Silicon Valley. And it does happen: there really was a garage at Hewlett-Packard in the 1930s, Apple in the 1970s, and Google in the 1990s. The Mountain View, CA-based Y Combinator startup incubator, where most companies consist of two or three co-founders, is essentially one big garage. But startups can also come from other places—including large technology companies, where there’s often a surfeit of creative researchers and product developers, but a shortage of vision among company leadership about how to bring their promising ideas to market. (Or, to put it more charitably, a disconnect between the researchers’ ideas and the companies’ existing markets.)

That’s where New Venture Partners comes in. At this one-of-a-kind firm, which has offices in San Mateo, CA, Murray Hill, NJ, Ipswich, England, and Bussum, The Netherlands, the specialty of the house is finding promising technologies that aren’t going anywhere inside their native corporate R&D labs and spinning them out into successful companies. With more than $700 million under management, including a $300 million fund that closed in 2006, NVP has unearthed buried jewels at more than 50 technology, cleantech, and healthcare organizations, including big names like Boeing, British Telecom, Intel, Lucent, and Philips. Many of the spinouts it has helped to birth have gone on to lucrative exits, including Flarion Technologies (acquired by Qualcomm), Celiant (acquired by Andrew Corporation), SyChip (acquired by Murata), and Vallent (acquired by IBM).

NVP is a spinout itself. It was originally formed in 1997 as the New Ventures Group at Lucent Technologies, the telecom giant that had inherited most of Bell Labs from AT&T. Many technology corporations were experimenting at the time with corporate venture groups as a way to manage disruptive innovation—in fact, Xconomy CEO and editor-in-chief Bob Buderi wrote a feature article about the New Ventures Group and its implications for Lucent and the wider industry for the November 2000 issue of Technology Review. But the group’s tenure inside Lucent turned out to be short-lived. In 2001, with the telecom industry flailing and Lucent in financial disarray, a “special situations” fund called Coller Capital bought most of Lucent’s equity stake in the group’s portfolio, and spun out the core team as New Venture Partners.

NVP went on to raise its own funds and to absorb the corporate venture groups at British Telecom in 2003 and Philips in 2004. In 2007, the firm reeled in one of its biggest catches: David Tennenhouse. A computer scientist who trained at the University of Toronto and the University of Cambridge, Tennenhouse has a ridiculously broad resume that spans the worlds of academia, defense, corporate research, and e-commerce. Most recently, he’s served as chief scientist and director of the Information Technology office at the Defense Advanced Research Projects Agency; vice president and director of research at Intel Corporation; and vice president of platform strategy at Amazon and CEO of its A9.com research subsidiary.

I got to know Tennenhouse in the early 2000s when he was at Intel. When I returned to the Bay Area this summer to open Xconomy San Francisco and learned that he was at NVP, I contacted him right away to arrange an interview. I wanted to know how the spinout business is going, and how NVP’s challenges differ from those encountered by the average venture capital firm.

Our conversation was in-depth and fascinating, so I’ve broken it up below into two parts. In Part 1 today, Tennenhouse talks about the firm’s basic mission, why large corporations so often fail to find a commercial home for their own promising technologies, and how NVP operates. In Part 2, coming later this week, Tennenhouse talks about specific spinout examples that illustrate his firm’s approach.

Xconomy: What is the mission of New Venture Partners?

David Tennenhouse: The mission is pretty straightforward. To me, it is a bit of a personal mission. It’s identifying “stranded” research and trying to spin that out into stand-alone ventures that can create value for the company that sponsored it, for the employees, and more importantly, at some level, for society as a whole. People always talk about putting research “on the shelf.” There is no shelf. Teams dissipate. Some number of years later, another team comes along and reinvents it.

There are a lot of different reasons why research gets stranded. Applied research is not curiosity-driven, so we usually have a goal of figuring out how to … Next Page »

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Microsoft is cutting its three-year-old Live Labs applied research group in half and moving the rest of the staff to product groups and other divisions, as first reported by PaidContent.org. Microsoft cited economic conditions as part of the reason for the move. The remaining Live Labs staff will focus on Internet search technologies.

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A couple of news tidbits involving China in the past week have made me look more closely at what local startups and companies are doing to expand there. On Thursday, Seattle-based Airbiquity, a wireless communications firm focused on the auto industry, announced it has entered the Chinese market, branding itself locally as Ai Bi Ke Communications Technology and setting up an office in Chengdu. The move makes good sense, given China’s burgeoning car culture.

And yesterday, Seattle-based wireless startup Movaya announced its Chinese mobile-development team, also in Chengdu, is teaming up with PressOK Entertainment’s software teams in Russia and Belarus to develop mobile games. Ken Myer, the CEO of the Washington Technology Industry Association (WTIA), told me last month that he thinks the Chinese market for mobile games is pretty far behind the U.S.—but it could be a good time to get in on other mobile software applications.

Not sure what it all means yet, but it’s clear there’s a pattern. Chinese talent, companies, and market opportunities are becoming more embedded in the fabric of Seattle-area innovation. While the economic downturn could lead more U.S. companies to outsource jobs and services, they are also trying to tap a new global market. And on the flip side, Chinese universities and companies are looking to develop leadership roles and move up the value stream. It’s a compelling situation to watch.

A few other recent highlights:

—Bellevue, WA-based Formotus and Seattle-based Mobile Semiconductor talked to me about building relationships with strategic investors and partners in China. The mobile companies were part of a five-company WTIA contingent that toured China in October. One key takeaway was that building these relationships and understanding the market takes time and patience.

—Issaquah, WA-based McObject, a maker of data management software, has expanded in China this fall, adding a team in Beijing doing work on embedded databases. McObject, which was also part of the WTIA tour, already has a presence in the Chinese market, but is looking to accelerate its growth there.

—Oberon Media, a New York-based developer of games and platforms with a Seattle publishing office (I-Play), scored a $20 million strategic investment from Hong Kong-based Infinity Equity in October. The partnership represents a strong effort to establish an Oberon presence on the ground in China.

—It’s definitely not just about outsourcing anymore. Bellevue-based Intellectual Ventures, headed by Nathan Myhrvold and Edward Jung, has opened an office in Beijing. Its goal is to work with local universities and institutes to help commercialize inventions, as well as keep tabs on foreign competition for ideas and intellectual property. The company’s Asian expansion is being led by global technology head Patrick Ennis, who spoke with me recently.

—Microsoft Research Asia, based in Beijing, celebrated its 10th anniversary last month. The lab has become an epicenter for computer-science research in several areas, including graphics, user interfaces, multimedia, search and advertising, and now cloud computing and theory. Three of the lab’s managing directors have gone on to become Microsoft vice presidents in Redmond.

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When corporate R&D rains, it pours. On the heels of Intel Research Seattle’s annual open house, an even bigger tech giant across Lake Washington is stirring up some serious action across the pond. Microsoft announced today it is opening a European Search Technology Center, with three main offices in the Paris, London, and Munich areas. Its goal is “to tap into local expertise and fuel local innovation with job opportunities that will help reinvent the European consumer online and search experience,” according to a Microsoft statement. The center will be headed up by general manager Jordi Ribas, who hails from the Microsoft Connected TV business group.

The European effort is being viewed as another way to compete with Google and other search engines in the battle for Internet advertising revenues, according to the New York Times, which quotes Microsoft CEO Steve Ballmer as saying, “Investing in anything at this time can be a tough sell…But when economic times are tough, we have to keep our faith in the promise that technology holds to transform the future.” Ballmer did not say how much Microsoft is investing in the new search center, but did confirm it will employ several hundred workers.

In a statement, Ballmer said, “To compete in a global, innovation-driven economy, we need to draw on the world’s smartest, most creative minds. Increasingly, we are finding the talent we need here in Europe.” Ballmer called the new search center “an important step forward in our long-term strategy to invest in local development of search technology in Europe. We believe search is still in its infancy. Developers at the Search Technology Centre will play a key role in helping us redefine search as they create new search products and services for consumers and advertisers here in Europe and around the world.”

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