Sep. 11, 2014, 2:26 PM
- Analysts appear split on the viability of EMC's (EMC +0.5%) reported interest in selling its stake in VMware (VMW -0.6%).
- UBS analyst Steve Milunovich, who has a Buy rating on EMC, writes that "we increasingly believe something is up," and noting that EMC CEO John Tucci's contract is up next February, and while he may stay, it's possible the board is worried about the EMC/VMW federation if he departs.
- However, Wells Fargo says that while EMC selling its stake would provide a considerable cash infusion, the sale would not be tax free, and therefore "sub-optimal."
- Reuters is now quoting a source said to be familiar with the company's thinking that EMC is not considering a sale.
Sep. 11, 2014, 7:45 AM
- EMC +2.7% premarket following a NY Post report that it is exploring a sale of its stake in VMware (NYSE:VMW).
- Paul Singer’s Elliott Management, which has reported a 2% stake in EMC, has been pressuring the tech giant specializing in cloud-based applications to exit its 80% stake in VMW.
- EMC bought VMW for $600M in 2004; VMW's current market cap is $41B.
Aug. 25, 2014, 7:13 PM
- VMware (NYSE:VMW) has used its analyst day (held at VMworld) to guide for mid-teens 2015 revenue growth; consensus is at 15.5%. Op. margin is expected to grow 100 bps Y/Y.
- Software-related VMworld announcements include: 1) A collection of tools meant to support the OpenStack cloud infrastructure (IaaS) platform. 2) A partnership with Google, startup Docker, and the Pivotal spinoff through which VMware's software will support Docker's Linux app containers. 3) New mobile, storage, and on-demand services for the vCloud Air IaaS platform (formerly vCloud Hybrid). 4) Updates to VMware's NSX SDN platform and vCloud Suite that respectively add new security and provisioning features. 5) The vRealize Suite, a cloud management platform that bundles several existing products.
- The OpenStack and Docker announcements have raised eyebrows, given OpenStack competes with VMware's cloud management offerings and Docker's containers act as a lightweight alternative to traditional virtualization software. The vRealize Suite will square off against products from the likes of Microsoft and Red Hat.
- "VMware’s strategy would commoditize some of what EMC does," says Baird's Jason Noland, taking stock of VMware's hardware and software efforts. "Neither one will admit it, but they’re heading right at each other."
- EMC downplays the commoditization risk, calling it "speculation at best." The storage giant has already shown a willingness to embrace software platforms that can affect sales of its proprietary hardware, or at least lower vendor lock-in.
Aug. 25, 2014, 6:25 PM
- VMware's (VMW -1.4%) EVO: RAIL system, formerly codenamed Project Mystic and Marvin, consists of an integrated server/storage/networking appliance optimized to run VMware's vSphere virtualization platform. VMware won't sell the hardware, but will instead rely on partners such as Dell, Fujitsu, Super Micro (NASDAQ:SMCI), and (of course) EMC.
- EVO: RAIL, revealed on the first day of VMware's VMworld conference, can scale to 4 appliances and 16 nodes. VMware promises unmatched deployment times for virtual machines.
- VMware suggests the system, which enters a crowded converged hardware market already featuring H-P, Dell, and EMC/Cisco's VCE JV, is meant to handle use cases such as PC virtualization infrastructures and remote/branch offices, rather than act as a high-end server replacement. VCE is more focused on the high-end.
- The company is also previewing EVO: RACK, a converged hardware system meant for hyperscale Web/cloud deployments. EVO: RACK is meant to leverage commodity hardware designs, such as those delivered by Facebook's Open Compute Project.
Aug. 20, 2014, 4:43 PM
- CloudVolumes asserts its software allows companies to "deliver any number of applications and any amount of data to any number of virtual machines within milliseconds or seconds." It offers products for both server and PC virtualization platforms, and also for migrating/delivering apps on cloud-based servers.
- The synergies with VMware's (VMW, EMC) server and PC virtualization platforms, each of which have been dealing with tough competition, are easy to see. As it is, CloudVolumes' software integrates with VMware's vCloud Automation Center (aims to automate IT service delivery).
- VMware hasn't disclosed the acquisition price. The company predicts the combination of CloudVolumes and VMware's Horizon (PC/app virtualization) platform will "allow customers to build a real-time application delivery system that enables all applications to be centrally managed, always available and up-to-date, and delivered to virtualized environments for desktop, server or cloud on-demand."
- Yesterday: VMware shakes up C-suite
Aug. 19, 2014, 9:46 AM
- VMware (VMW, EMC) CFO Jonathan Chadwick will now also be the company's COO. His new position makes him "responsible for operational excellence across key business functions including HR, finance, legal, IT, and operations, and for introducing new business models and processes."
- Current COO Carl Eschenbach is "taking on an expanded role with the addition of the Corporate Strategy and Business Development function moving into his organization." He'll continue leading VMware's "customer engagement across Sales, Marketing, Services, Global Customer Operations and VMware's Global Partner Organization."
- In addition, HR chief Betsy Sutter has been named chief people officer; hybrid cloud (vCloud Hybrid) GM Bill Fathers has been made an EVP; and Nicira co-founder/networking CTO Martin Casado will be the SVP of both VMware's networking and security products.
- VMware's last big C-suite shakeup was in 2012, when Paul Maritz was replaced as CEO by Pat Gelsinger.
Aug. 4, 2014, 11:57 AM
- EMC (EMC +1.3%) investors can make out well whether or not the company gives into Elliott Management's call to fully spin off VMware (VMW +1.7%), says Barron's in a weekend column.
- If a VMware spinoff occurred, the rest of EMC would likely be assigned a higher valuation than its current $17B. But even if it doesn't, the company's $9B net cash balance and strong free cash flow leaves it well-positioned to raise cheap debt to finance buybacks; EMC recently hiked its 2014 buyback target by $1B to $3B.
- Credit Suisse thinks EMC could be worth $38/share if a spinoff happened. Barron's estimates $5B in buybacks, together with respective valuations of 21x and 10x forward EPS for VMware and core EMC, would yield a $33/share valuation.
- The paper also defends EMC's storage ops, arguing demand for on-premise systems can remain healthy in the face of rapid cloud storage adoption. EMC's high-end storage sales (VMAX) have been weak, but its emerging storage business (covers flash, object, and scale-out NAS storage) has been faring better.
Aug. 1, 2014, 8:57 AM
Jul. 23, 2014, 10:19 AM
- EMC (EMC +1%) is reiterating 2014 revenue guidance of $24.575B, and raising 2014 EPS guidance by a penny to $1.91; that roughly matches a consensus of $24.57B and $1.91.
- With Elliott Management circling, the company now plans to buy back $3B worth of shares in 2014, up from a prior $2B. $600M was spent on buybacks in Q2, and $390M in Q1.
- Not surprisingly, EMC rejects Elliott's call to divest VMware (VMW +1.8%), and uses its earnings slides (.pdf) to point to synergies yielded by a "federation" strategy that involves holding onto VMware and Pivotal.
- Information Storage revenue (67% of total) rose 7% Y/Y in Q2 with the help of new products, a turnaround from Q1's 3% drop. High-end storage was still weak, declining 14% to $1.03B ahead of a VMAX refresh. But unified storage and backup/recovery (VNX, Data Domain) +6% to $1.57B, and emerging storage (flash and object storage, scale-out NAS) +52% to $470M. Other storage -6% to $900M.
- RSA Security +6% to $240M, content management +4% to $160M, Pivotal +29% to $54M.
- Product revenue only rose 2% Y/Y, while services revenue (more stable) rose 9%. Gross margin fell 50 bps Y/Y to 63.8%, and op. margin 160 bps to 22.6%, thanks partly to healthy increases in R&D and .SG&A spend.
- VMware is moving higher, following an initially muted reaction to its Q2 beat and in-line guidance. CLSA has upgraded shares to Buy, citing the strength of new products and the potential for a spinoff.
- Q2 results, PR
Jul. 23, 2014, 7:06 AM
Jul. 22, 2014, 10:47 PM
- VMware (NYSE:VMW) guided on its Q2 CC for its Q3 revenue of $1.48B-$1.52B, in-line with a $1.5B consensus. Full-year revenue guidance has been narrowed to $5.96B-$6.08B from a prior $5.94B-$6.1B; consensus is at $6.02B.
- License revenue rose 16% Y/Y in Q2, up from Q1's 15% and near the high end of guidance of $605M-$615M. VMware expects Q3 license revenue of $630M-$645M (+12%-14%), and full-year license revenue of $2.56B-$2.62B (+13%-15%).
- Services revenue (driven by past deals) rose 18% in Q2 to $843M. Op. margin fell to 29.4% from 33.5% a year ago.
- VMware's costly enterprise license agreements (ELAs) rose to 37% of bookings from 25% in Q1; eight $10M+ ELA deals were inked in Q2 vs. two in Q1.
- Cloud management license bookings grew over 30% Y/Y for another quarter, and end-user computing (PC virtualization/AirWatch) rose over 50%. ~50% of ELAs once more included the entire vCloud Suite.
- The company also says its much-hyped NSX networking virtualization/SDN platform is now on a $100M+/year run rate, and that its VSAN storage virtualization platform beat internal targets. Judging by total license growth rates, standalone server virtualization revenue is growing relatively slowly.
- Unearned (deferred) revenue +22% Y/Y to $4.39B. Long-term unearned revenue +23% to $1.68B.
- VMW +0.5% AH, as the guidance and a Q2 beat are taken in stride. Parent EMC, just challenged by Elliott Management to unload VMware, reports Wednesday morning.
- Q2 results, PR, earnings slides (.pdf)
Jul. 22, 2014, 5:30 PM
Jul. 21, 2014, 6:39 PM
- 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.
Jul. 21, 2014, 7:39 AM
- 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.
Jul. 16, 2014, 12:35 AM
- VMware (NYSE:VMW) is forming a JV with SoftBank (OTCMKTS:SFTBF) to offer its vCloud Hybrid cloud infrastructure (IaaS) service in Japan. VMware will build and run the service, and SoftBank will provide the data centers and network it runs on. Both companies will offer the service through their sales channels.
- Over in China, VMware is partnering with China Telecom (NYSE:CHA) to offer vCloud Hybrid. In this case, China Telecom will operate the service, and VMware will simply provide the underlying software. The arrangement could appeal to Chinese firms hesitant to use a public cloud run by a U.S. company (say, Amazon) following the NSA uproar.
- Until now, vCloud Hybrid (launched in 2013) was only available at U.S. and U.K. sites. The service has won praise for the way it lets users jointly manage and quickly migrate public and private cloud workloads, but it continues facing tough competition from Amazon, Microsoft (the hybrid cloud leader), Google, IBM, and Rackspace, among others.
- Separately, parent EMC's RSA unit has bought technology assets from Symplified, a provider of cloud identity management services that enable single sign-on and automatic user provisioning for a variety of cloud apps/services. Symplified is shutting down its operations.
- EMC/RSA says it will add Symplified's IP to its Identity solutions portfolio. The purchase follows RSA's 2013 acquisition of Aveksa, a provider of tools for managing access to corporate apps and data.
- VMware reports on July 22, and EMC the following morning.
Jul. 8, 2014, 10:59 AM
- EMC (EMC -1.3%) has acquired TwinStrata, developer of a software platform (called CloudArray) that creates a secure connection between on-premise storage and public cloud storage providers, and allows the resources to be jointly managed. Terms are undisclosed.
- Among other things, CloudArray supports automatic cloud replication, local caching for high-use data, and integration with 3rd-party backup software. Supported cloud providers include Amazon, Google, Rackspace, and IBM/SoftLayer.
- A July 2013 Network World review called CloudArray "something of a milestone" for on-premise/cloud storage connectivity, albeit while adding the product still "needs polish."
- EMC says it'll integrate CloudArray with its high-end VMAX systems, and thereby provide an "embedded [cloud] data service" for VMAX. The move comes as rival NetApp overhauls its Data ONTAP OS to support joint on-premise/cloud storage management.
- EMC has been busy fleshing out its software lineup amid soft hardware sales. Last year, the company rolled out its ViPR storage management software platform, which can handle both EMC and non-EMC systems, and acquired ScaleIO, a developer of software that can pool and manage storage scattered across commodity servers.
EMC vs. ETF Alternatives
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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