EMC to Spin Off Its VMware Stake? Aggressive Call Buyers Certainly Think So

Yes, it looks like option traders are betting on a jump in EMC Corp. (EMC) shares during the next two weeks. Aggressive call-buyers traded over 113,000 of the $15-strike calls, three times the open interest, pushing the contract up 72 cents, or up 380%.

The contracts closed at 89 cents, meaning the EMC shares would need to surpass $15.89 for the call buyers to be profitable. One can only hypothesize the motivation, but the WSJ’s Tennile Tracy quoted rumors that Cisco Systems (CSCO) might make an offer for EMC, or that EMC possibly will divests its 85% stake in VMware (VMW).

EMC’s Chairman and CEO Joe Tucci did not deny this proposition in EMC’s Q2 earnings call saying:

“I kind of know a lot more of what’s going on than anybody else and we will do the right thing for the shareholders when and if the time is right.”

Additionally, the opportunity to announce this divestiture may come at be Pacific Crest Securities Technology Conference on August 4.

Disclosure: Long EMC

Comments

[johnnysize:]

Why would they push for IRS approval now in a weak environment. VMW could be simply JV'd with someone like CSCO. Spinning VMW now would be the worst possible move for EMC and they will wait until the cycle picks up or after they dont need IRS approval next year.

2008 Aug 07 09:41 AM