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WSJ: Elliott Management pushes EMC to spin off VMware unit

  • EMC +4.9% premarket following a WSJ report that activist investor Elliott Management has taken a $1B-plus stake in the company and plans to push for a spinoff its VMware (NYSE:VMW) unit.
  • Elliott's investment would amount to ~2% of EMC’s $55B equity value, and would make the hedge fund its fifth-largest shareholder and would be one of the largest positions Elliott has ever taken.
  • Elliott will seek to convince EMC that the company’s lagging stock would receive a substantial boost if it were to spin off VMware, the report says.
Comments (4)
  • Jocardan
    , contributor
    Comments (30) | Send Message
     
    I am slightly confused here. I was under the impression that VMware was a money maker for EMC? Were that the case, why would they want to spin it off?
    21 Jul, 08:15 AM Reply Like
  • Ajayyy
    , contributor
    Comments (317) | Send Message
     
    If I remember right, VMW is where the growth is at but EMC by itself is quite a FCF machine.

     

    The problem is that the whole of EMC is structured in an odd, ineffective way. If they were to spin of some assets and restructure debt, they could really improve their margins. There are quite a few articles on SA discussing this. I'm not very well informed but if you read them you will understand that this makes sense.
    21 Jul, 08:22 AM Reply Like
  • Ichdenke
    , contributor
    Comments (6) | Send Message
     
    Activist investors rarely care about the long-term health of the companies they target. They can move their stock somewhere else in under a minute if a company starts to do badly. They just care about the moment. If they can pump the stock up by 10% NOW! Well, that's a pretty good return. And then they can take their profits and move them somewhere else. EMC knows how to run their company far better than Elliot does. EMC wants the company to be successful for the long term.
    21 Jul, 09:08 AM Reply Like
  • HuhWhat
    , contributor
    Comments (21) | Send Message
     
    VMware isn't achieving its best growth potential because its part of EMC. EMC & Cisco are converging on the same marketplace and there is bad relationship and competitive limitations.

     

    A VMware free from EMC profit margins and internal processes could really break out into new markets. The current ownership prevents them from reaching in storage and unlocking value, from aggressively displacing Cisco in SDN. EMC is protecting itself from falling revenues. Spin out VMware, realise the cash and close down EMC.
    21 Jul, 04:00 PM Reply Like
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