Seeking Alpha

Street skeptical EMC will unload VMware

  • Though Elliott Management is pushing EMC (EMC +5%) to fully spin off VMware (VMW -2.5%), "management has made it clear its not in the best interest of EMC to do so" as recently as May, notes RBC. The firm considers it more likely EMC will buy out VMware's minority holders.
  • Nonetheless, RBC thinks Elliott's efforts could propel EMC's shares higher, given the low valuation assigned to EMC ($58B market cap) excluding its VMware stake (market value of $32B). Oppenheimer, for its part, is hoping Elliott will get EMC to return more cash or cut costs.
  • EMC has long argued holding onto VMware yields product synergies between VMware's server virtualization and data center/cloud management software, and EMC's storage hardware and management software.
  • Among other things, the companies are currently working on Project Mystic, an integrated server/storage appliance that includes VMware's server (vSphere), storage (VSAN), and networking (NSX) virtualization offerings.
  • Aside from product synergies, there's the fact VMware (expected to post 15%+ sales growth in both 2014 and 2015) continues to grow much faster than EMC's storage ops, which have been pressured by soft high-end demand and the adoption of cloud storage services running on white-label hardware.
Comments (4)
  • jcole2222@yahoo.com
    , contributor
    Comments (25) | Send Message
     
    Elliott wants to have EMC sell VMware. It will not improve my investment or anyone else's investment. It will improve Elliotts investment. Maybe Elliott should concentrate on improving everyone's investment.
    21 Jul, 08:32 PM Reply Like
  • HuhWhat
    , contributor
    Comments (24) | Send Message
     
    VMware is probably worth twice as much on the open market than being part of VMware. Having to kowtow to a legacy storage company with increasingly obsolete technology is definitely holding VMware back.

     

    I dubious that Joe Tucci will let VMware go because its the only thing holding up EMC share price. Everything else in EMC is shrinking slowly as open source software and changing customer needs move away from the business models of EMC.
    22 Jul, 03:06 AM Reply Like
  • bnkd
    , contributor
    Comments (45) | Send Message
     
    How is EMC benefiting owning 80% of VMW when VMW price is going no where?
    VMW needs to be successful with its business model and products.
    22 Jul, 09:15 AM Reply Like
  • wil3714
    , contributor
    Comments (1955) | Send Message
     
    EMC doesnt need to do anything they are doing fine, just concentrate on its bus and not what others think.
    22 Jul, 09:40 AM Reply Like
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