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Oct. 8, 2015, 4:43 PM
- While EMC finished up 4.7% following reports the company is in merger/LBO talks with Dell, VMware (NYSE:VMW) went in the opposite direction. Driving the selloff: Speculation Dell will sell or spin off part of EMC's 80% VMware stake to make a deal easier to digest.
- Though reporting Dell wants to maintain control of VMware (growing much faster than core EMC, and also much faster than Dell was before it was taken private), CNBC's David Faber states there might also be "a distribution of some of [EMC's] VMware stake to shareholders."
- Likewise, Bloomberg reports Dell "may sell off some of EMC’s VMware shares in order to raise money," while keeping VMware publicly-traded. It adds Dell is talking with JPMorgan, BofA, and other banks about raising at least $40B in financing, and that "the current plan" is for Michael Dell to run the combined company.
- Macquarie's Rajesh Ghai: "Such a deal structure would be agreeable to Elliott, considering it is in essence a version of its earlier demand that EMC spin off (VMware) to unlock value in its undervalued (ex-VMware) stub. We believe such a structure would involve EMC issuing shares to Dell's shareholders for the initial merger with Dell, and then executing a tax-free spinoff of (VMware) as a second step."
- As VMware slumped, EMC/Dell storage rival NetApp (NASDAQ:NTAP) rose 2.4%, aided by M&A hopes and perhaps also a belief NetApp could take share as EMC and Dell work to integrate their storage lines and remove duplicate products. Longbow's Joe Wittine: "We think the [EMC/Dell] rumor is encouraging for NTAP, which would see a similarly-underperforming competitor in Dell EqualLogic lose importance and likely donate share. While NetApp would still have its product issues, it becomes easier to make a case as NetApp as takeout fodder from Cisco or others."
- Also rallying: HP, which is about to split its enterprise IT ops from its PC/printing ops
Oct. 8, 2015, 9:09 AM
- CNBC's David Faber reports a Dell bid for the whole of EMC would be above $27/share. For reference, EMC closed yesterday at $25.96.
- Faber adds a deal could be a week away, and would require $40B in financing. Dell would keep control of VMware (VMW - 80%-owned by EMC).
- EMC +5.2% premarket to $27.30. The company's market cap stands at $52.6B. VMW +0.5% to $82.52.
- The WSJ reported of Dell/EMC merger talks yesterday evening.
- Update (9:22PM ET): VMware is now down 1.4%.
- Update (1:06PM ET): Bloomberg also reports of deal talks, while adding several major banks have been approached regarding financing. EMC would be taken private, while VMware would remain publicly-traded. EMC is up 5%, and VMware down 6.2%.
Oct. 7, 2015, 7:00 PM
- The WSJ reports Dell (taken private in 2013) is in talks to merge with EMC, while adding it's not clear if a deal would be for all or part of EMC.
- Dell was taken private for $24.9B. EMC closed today with a $50B market cap. IDC estimates Dell had 14.5% of the PC market in Q2, and 17.5% of the server market (entirely x86 server sales). The company also sells storage hardware (competes to an extent with EMC, among others), networking equipment, peripherals, printers, and software.
- Last year, EMC was rumored to have held buyout talks with HP. There has been speculation the company could strike a major deal prior to CEO Joe Tucci's expected retirement, particularly with activist Elliott Management (has been pushing for a VMware spinoff) maintaining a stake.
- A Dell acquisition would present major integration challenges, but would also allow EMC to sell enterprises an end-to-end IT hardware product line (or close to it) as it competes with the likes of HP, IBM, Cisco, and Oracle, and also yield cost synergies. Like peers, both Dell and EMC have been pressured by enterprise adoption of public cloud services running on commodity hardware built by contract manufacturers.
- EMC is up 4.4% after hours on the report. Subsidiary VMware (NYSE:VMW) is up 0.5%.
- Update (7:16PM ET): The full story is up. EMC is now up 7.8% after hours.
Oct. 1, 2015, 3:04 PM
- Though its standstill agreement with EMC (EMC) expired today, activist Elliott Management is giving the storage giant most of October to respond to its demands, Reuters reports.
- Elliott, which obtained two board seats earlier this year as part of a standstill deal, has long been pushing for EMC to spin off its 80% VMware (VMW +2.5%) stake. It's also in favor of larger buybacks.
- EMC storage division chief David Goulden recently reiterated the company line that EMC and VMware are better off together. Re/code reported in August EMC's board has mulled a VMware acquisition of EMC (i.e. a downstream merger).
- VMware has gradually rallied today. Its shares have previously sold off on reports raising the possibility of a downstream merger or EMC stake spinoff.
Sep. 1, 2015, 2:59 PM
- As usual, VMware's (VMW +0.5%) annual VMworld conference has been filled to the brim with product and partnership announcements. Among the most prominent: A deal with rival Microsoft (NASDAQ:MSFT) to create a new product (called Project A2) for managing and upgrading Windows 10 PCs.
- A2 leverages VMware's AirWatch enterprise mobility suite, and its App Volume app management software. VMware: "We believe that we are pioneering a unique approach in the industry with a combination of heterogeneous management and real-time application delivery that makes applications lightweight, easy to deliver and simple to consume for users using any device."
- Meanwhile, Nvidia (NVDA -3.8%) has announced Grid 2.0, a new version of its server-based GPU platform for powering virtual PCs/workstations. Grid 2.0 works with VMware's Horizon virtual desktop software, and supports up to 128 users per server (up from 64 previously).
- VMware's core vSphere virtualization platform has been updated to support integrated app containers (often seen as a threat to standard server virtualization) from Docker and other container platforms. Underpinning the solution is Photon, a platform for deploying and managing containers running on top of vSphere.
- Also announced: 1) EVO SDDC, a product for managing/deploying data center resources; VMware promises many traditional deployment tasks can be automated. 2) VSAN 6.1, a new version of VMware's storage virtualization platform that supports new data protection features. 3) Disaster recovery, database, and object storage services for the vCloud Air hybrid cloud platform.
- Baird's Jayson Noland has upgraded VMware to Outperform after attending the company's analyst day (held at VMworld). He calls VMware "the best positioned software infrastructure provider," notes management was positive about enterprise license agreement (ELA) demand, and "continues to see potential for increased alignment with EMC and potentially a spin-in designed to drive improved cost and revenue synergy."
- VMware is up slightly on a day the Nasdaq is down 2.3%.
- Yesterday: VMware rises after downplaying EMC downstream merger rumor
- Last year's VMworld announcements: I, II
- Analyst day slides
Aug. 31, 2015, 3:58 PM
- On day one of VMware's (VMW +2.1%) annual VMworld conference, CEO Pat Gelsinger has downplayed reports EMC's (EMC -0.4%) board is mulling a downstream merger through which VMware would acquire its parent company using a mixture of stock and cash/debt. Gelsinger reiterates the company line that EMC/VMware's current "federation" structure is preferable to alternatives.
- VMware sold off last Wednesday on a Re/code report stating a downstream merger is being seriously considered. Elliott Management, whose standstill agreement with EMC ends tomorrow, was said to be willing to support such a deal, though it still prefers EMC fully spin off VMware.
Aug. 26, 2015, 12:54 PM
- EMC's board is "taking a second and closer look" at the idea of having VMware (VMW - 80%-owned by EMC) acquire the company, Re/code reports. The site, which originally reported such a deal (known as a downstream merger) was being considered in early August, adds a VMware purchase is "gaining favor" among director following EMC's recent selloff.
- Also: Sources state the board has decided CEO Joe Tucci "must step down from that role" before year's end. Tucci, who has delayed his retirement, reportedly opposes a downstream merger.
- The report comes ahead of the Sep. 1 expiration of a standstill agreement with activist Elliott Management, which (though still preferring a spinoff of VMware by EMC) has reportedly indicated it would support a downstream merger. The deal would involve VMware issuing ~$50B worth of shares, and making a cash payout by issuing ~$10B worth of debt.
- Yesterday: EMC hit hard as markets give back gains; VMware sees execs depart
Aug. 26, 2015, 9:14 AM
Aug. 25, 2015, 4:31 PM
- EMC fell 4.6% on a day the Nasdaq fell 0.4% and the S&P 1.4%, after (like many other names) opening the day with solid gains. 26.6M shares were traded, topping a 3-month daily average of 14.8M. Subsidiary VMware (NYSE:VMW) was down a relatively modest 1%.
- VMware has seen a couple of high-profile executive departures in recent days: CTO Ben Fathi recently told CRN he left the company, and Chuck Hollis, VMware's chief strategist for storage and availability, announced over the weekend he's departing. Fathi was only named CTO in early 2014; Hollis joined VMware in 2013, following 19 years at EMC proper.
- Separately, VMware has launched Fusion 8 and Workstation 12, the latest versions of its PC virtualization products - Fusion allows Windows to run on Macs, while Workstation allows multiple virtual machines to run on Windows systems. Both Fusion 8 and Workstation 12 offer Windows 10-related enhancements and an improved graphics engine.
Aug. 18, 2015, 6:20 PM
- Paul Maritz, VMware's (NYSE:VMW) CEO until 2012 and rumored to be a potential successor to Joe Tucci as EMC's CEO, has stepped down as the CEO of EMC and VMware's Pivotal analytics/cloud app platform unit. He'll remain Pivotal's executive chairman.
- Rob Mee, co-founder of the unit's Pivotal Labs division (provides software/services for businesses looking to embrace Agile software development), is the new CEO. Maritz, 60, suggests he'll now spend more time advising companies he has invested in, and working on a non-profit.
- Pivotal, spun out of EMC/VMware in late 2012, had Q2 revenue of $64M (+19% Y/Y). The unit's IPO plans have been put on hold as it works to grow sales and fend off rivals such as Microsoft, IBM, Red Hat, Hortonworks, and Cloudera. In 2013, GE paid $105M for a 10% stake.
Aug. 10, 2015, 1:32 PM
- VMware (NYSE:VMW) CEO Pat Gelsinger has told Israel's Calcalist his company has no interest in acquiring parent EMC (EMC +0.5%), arguing the status quo suits both companies well.
- Re/code reported last week EMC is considering a deal in which VMware would buy its parent, along with other strategic options. VMware sold off on the report, while EMC rallied.
- Echoing a common view, UBS' Steve Milunovich argued today such a deal would be a positive for EMC shareholders, and a negative for VMware shareholders. Last week, BMO's Keith Bachman noted either a VMware purchase of EMC or the opposite could be accretive (depending on financing), but called both potential deals "suboptimal compared with splitting up the company and selling the pieces."
- VMware has rallied back above $87. EMC is up modestly on an up day for stocks.
Aug. 5, 2015, 3:57 PM
- Two days after Re/code speculated EMC may be close to acquiring the ~20% of VMware (NYSE:VMW) it doesn't own, the site reports (citing sources) EMC is considering a scenario in which VMware would acquire EMC proper, along with other strategic options.
- Under such a scenario, known as a downstream merger, VMware would issue new shares in exchange for EMC shares, and also deliver a cash payout financed via debt.
- Re/code also notes EMC has considered selling itself to HP (previous) and Cisco, as well as making big acquisitions. The likely catalysts: CEO Joe Tucci wants to leave EMC on better footing before stepping down, and the company is looking for ways to lower its dependence on a core storage business pressured by public cloud storage growth and competition from flash/hybrid array upstarts.
- EMC has risen on the report, while VMware is off sharply.
Aug. 3, 2015, 2:52 PM
- A mid-day Re/code column stating EMC (EMC -2.4%) "may be getting close" to potentially acquiring the ~20% of VMware (VMW +1.6%) it doesn't own (i.e. do a spin-in) has led the latter's shares to rise. The former's have remained lower on a down day for equities.
- Re/code notes EMC CEO Joe Tucci mentioned on the Q2 earnings call (transcript) EMC could reap over $1B in synergies if EMC gets "tighter aligned" with VMware. It also speculates Tucci may want a "grand exit" ahead of his expected retirement.
- RBC's Amit Daryanani estimates fully merging EMC and VMware could yield nearly $950M in 2016 cost savings, and (thanks partly to the fact EMC would own 100% of VMware's earnings instead of 80%) boost EMC's EPS by $0.40-$0.50.
- Activist Elliott Management has, of course, been calling for EMC to fully spin off its VMware stake. EMC officially decided against making such a move earlier this year, citing product synergies between the companies. The fact VMware (Q2 revenue +10% Y/Y) continues to grow much faster than EMC's core Information Storage ops (Q2 revenue +1% Y/Y) might have also influenced EMC's decision.
Jul. 31, 2015, 8:40 AM
- EMC (NYSE:EMC) declares $0.115/share quarterly dividend, in line with previous.
- Forward yield 1.72%
- Payable Oct. 23; for shareholders of record Oct. 1; ex-div Sept. 29.
Jul. 23, 2015, 10:01 AM
- Four months after downgrading EMC (EMC +2.1%) to Market Perform in the wake of its investor meeting - a lack of near-term catalysts was cited - Wells Fargo's Maynard Um has upgraded back to Outperform in the wake of the storage giant's Q2 report, while setting a $29-$31 valuation range.
- This time, Um cites the potential for positive strategic moves by year's end, including (curiously, given many others have argued a full spinoff would be a positive) a buy-in of the ~20% of VMware EMC doesn't own.
- Meanwhile, during yesterday's earnings call (transcript), CEO Joe Tucci stated EMC has launched a program to lower its cost base by $850M/year by the end of 2016. Only $50M worth of cost savings are expected this year.
- Tucci also mentioned EMC's board is "deeply engaged in a smart navigation" of its CEO succession process. Three years ago, Tucci suggested he would retire by Feb. 2015.
- Shares +4.2% since EMC posted a Q2 EPS beat and offered light guidance on Wednesday morning.
Jul. 22, 2015, 10:22 AM
- With expectations low going in - a raft of downgrades have arrived in recent months, EMC is higher in spite of guiding for 2015 revenue of $25.3B and EPS of $1.87, below a consensus of $25.6B and $1.90. Full-year free cash flow guidance has been cut by $100M to $4B.
- Product revenue remained under pressure in Q2, falling 3% Y/Y to $3.22B. Services revenue (driven by past product sales) rose 8% to $2.77B. Gross margin fell 190 bps Y/Y to 61.9%, and op. margin fell 320 bps to 19.4%.
- EMC's core Information Storage ops saw revenue rise 1% Y/Y to $4.03B. High-end storage sales fell 13% to $892M and unified & backup/recovery sales (mid-range) fell 9% to $1.43B, but emerging storage (flash, scale-out NAS, object storage) rose 49% to $718M, "other" storage (includes VCE's converged systems) rose 18% to $496M.
- VMware (up 3.6%) saw revenue rise 10% Y/Y to $1.6B, with license revenue rising 4% to $638M; guidance was in-line. End-user computing (PC virtualization/enterprise mobility), NSX (networking virtualization/SDN), and VSAN (storage virtualization) were strong points for VMware, while traditional vSphere server virtualization licenses were soft. RSA Security revenue fell 2% to $238M, and ECD (content management software) revenue fell 3% to $155M.
- $718M was spent on buybacks. EMC still plans to buy back $3B worth of shares in 2015.
- Q2 results, PR, earnings slides (.pdf)
EMC Corp supports the businesses and service providers to transform information technology (IT) operations to an as a service model (ITaaS). It operates in three segments: EMC Information Infrastructure, Pivotal and VMware Virtual Infrastructure.
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