What's Moving EMC?

On Thursday, EMC Corp. (EMC) was dramatically higher by 5.22%, or $0.87, to $17.55. On top of Wednesday’s gains, that’s a 9.5% run over two days. One explanation could be that the EMC-VMware trade is back.

There was a surge in shares of VMware Inc. (VMW) on Thursday afternoon, which have been on a 21.7% tear since Apr. 22 when the virtualization company reported first quarter revenue of $438 million that beat the consensus estimate, and reaffirmed its full year outlook of 50% growth on $1.99 billion in revenue. EMC owns an 86% stake in VMware. However, given the EMC's volume on Wedneday of 57.1 million shares, and 42.5 million shares so far during the current session (note that average volume is typically only 31.7 million), and call option volume that is roaring with heavy buying in out of the money June and July calls, there has to be something more to the move.

It could be just coincidental, but following Hewlett-Packard’s (HPQ) Tuesday takeover of Electronic Data Systems (EDS) for $13.9 billion, trading has been extremely active. There has been mild speculation that EMC will spin off some of its VMware stake, but that remains to be seen especially after CEO Joe Tucci was pretty adamant about not having any such plans during the latest conference call, and it probably doesn’t make sense anyways with VMware valuation discounted as the stock has fallen well off its highs, and it’s even less likely that the upswing has to do with next week’s EMC World Conference. Nonetheless, something has gotten into EMC, but what that is still has yet to be determined.

Comments

[LonnieDevereaux]

Wow! Incredibly insightful piece. Why not just leave a blank page and sign your name. A true waste of electrons. Thanks so much.

[Say What?]

Probably the same person who always had their habd up in class - always needing to hear themselves talk

[shadowstabbing]

the only thing I did see that rang a faint bell was the fact that Warren Buffet lessened his position in Iron Mountain- maybe there's a perception that he has plans to buy into DIGITAL data storage and security?

[guliamo]

Don't know too much about this sector, but the Gurus seem to be loving VMW..
www.marketguru.com/opi...

[JohnBev]

My feeling still is that VMWare is S-o-o-o-o far ahead of their nearest competitor when you consider the full suite of products that it will take anyone, including Oracle or Microsoft, at least 2-3 years to get close to where VMWare is TODAY! And that gives VMWare 2-3 years to pull even further ahead. I could be wrong, but that means VMWare might hit $100/share again and very soon, too. VMotion, VMWare Lab Manager, VM Storage Motion, Distributed Resource Scheduler, VI3, ESXi 3.5, and on and on and on. Any IT Manager who bypasses VMWare for Microsoft Hyper-V has "got a lot of splainin to do".