Oct. 6, 2014, 9:09 AM
- EMC is trading higher after H-P officially announces it's breaking up in two, as investors bet the odds of a merger with the enterprise IT half of the company (to be known as Hewlett-Packard Enterprise) are higher than the odds of a merger with an integrated H-P that still sells PCs and printers.
- H-P might provide some hints at its Wednesday analyst day regarding whether H-P Enterprise will be open to a major merger/acquisition following the spinoff.
Oct. 5, 2014, 2:14 PM
- The WSJ reports H-P (NYSE:HPQ) plans to spin off its PC and printer ops into a separate, publicly-traded company. An announcement could happen as soon as tomorrow; the spinoff is expected to happen next year.
- Following the spinoff, what's left of H-P would bear a strong resemblance to IBM: A company providing an array of enterprise hardware (servers, storage, networking gear), software (systems management, security, analytics), and IT/cloud services. Ex-CEO Leo Apotheker famously explored unloading the PC ops in 2011, prior to his firing.
- Between them, H-P's PC and printing ops contributed 50% of the company's July quarter revenue, and also 50% of its segment op. profit. The printing unit's op. profit ($1.03B) was nearly 3x the PC unit's ($346M).
- PC revenue was up 12% Y/Y during the quarter (a notable improvement from recent quarters), while printing revenue (hurt by a secular shift towards online/mobile document and photo-sharing) was down 4%. Revenue for all other segments (pressured by software and services weakness) fell 2%.
- The enterprise IT half of the company could make for a more compelling M&A partner for EMC, which was recently reported to have held merger talks with H-P. Re/code has reported H-P was primarily interested in EMC on account of 80%-owned VMware (NYSE:VMW).
- Update: Re/code reports H-P opted for a breakup after failing to sell various business units (PCs, IT services, high-end servers) to Lenovo, Dell, Infosys, Wipro, and IBM.
Oct. 1, 2014, 4:30 PM
- EMC has hired Zane Rowe, who has done stints as United Continental's CFO and Apple's North American sales chief, to be its CFO.
- Rowe's predecessor, David Goulden, was named the head of EMC's core storage hardware/software ops in January. Goulden is now viewed as a potential successor to CEO Joe Tucci, if not the frontrunner.
Sep. 24, 2014, 2:33 PM
- John Chambers has dismissed speculation Cisco (CSCO +1.3%) could make a bid for EMC (EMC -1.1%). "If [EMC CEO Joe Tucci] and I were going to do something here, we would have done it a year or two ago."
- Likely an issue today: A Cisco deal would raise antitrust issues in the network virtualization/SDN software space, where VMware (VMW -0.3%) and Cisco have emerged as the early leaders. Also, Cisco's storage networking unit relies on OEM deals with EMC rivals (in addition to EMC).
- Meanwhile, re/code reports Oracle (ORCL +1.5%), another company whose name was thrown around in EMC deal speculation, is also uninterested.
- Recent reports stated EMC has held merger talks with H-P, but failed to agree (for now, anyway) on a price. Sources (possibly hoping to drum up M&A interest in EMC) added a deal with Cisco or Oracle was also possible. Re/code backs up the part about the H-P talks, while adding H-P was largely interested in owning VMware VMW via EMC.
- Many on the Street still think EMC will make a deal before Tucci's planned Feb. 2015 retirement. Tucci hasn't named a successor yet; Argus' Jim Kelleher consider ex-CFO David Goulden, now the head of EMC's storage hardware/software unit, to be the favorite. VMware CEO Pat Gelsinger and Pivotal CEO Paul Maritz are also in the running.
Sep. 22, 2014, 12:54 PM
- A source talking with Barron's: "They’ve been talking for months and months about this ... Yes, it hit a snag in July, and then resumed in August, and now it took a pause again in September. It could resume ... They were very close last week, and then things went on pause. Things feel very imminent-ish."
- The source (possibly hoping to bring an EMC suitor to the table) adds Cisco and Oracle are also viewed as potential EMC (EMC +1.3%) buyers. He/she also says a full VMware (VMW +1.1%) spinoff remains a possibility, and that EMC CEO Joe Tucci wants to complete a deal by year's end, before his planned Feb. 2015 retirement.
- The WSJ reported overnight EMC and H-P (HPQ -0.5%) had "held off-and-on merger discussions" for nearly a year. CNBC has since reported EMC wanted a large premium, and that H-P was open to unloading its cash-cow printer unit as part of a deal. The Barron's source says an H-P printer unit sale would be "a down the road thing," if it happened.
- The NYT has reported EMC and H-P were discussing a "merger of equals." H-P currently has a market cap of $68.3B, and EMC a market cap of $60.8B. EMC and VMware are trading higher, while H-P is off modestly amid a tech selloff.
Sep. 22, 2014, 12:12 AM
- EMC "held off-and-on merger discussions" with H-P (NYSE:HPQ) for nearly a year before the talks recently ended, the WSJ reports. The storage giant is also said to have held talks with Dell, but it's not clear where the discussions now stand.
- The WSJ notes Cisco and Oracle are also seen as potential EMC merger partners, and reports JPMorgan is advising the company on its options. The WSJ's report follows one from the NY Post stating EMC is exploring selling its 80% VMware (NYSE:VMW) stake, in the wake of pressure from Elliott Management.
- Beyond that, EMC and fellow IT hardware giants have seen their sales pressured by a secular shift towards cheaper hardware, and the adoption of white-label systems by Web/cloud service providers who account for an ever-growing portion of hardware usage. That might be motivating IT giants to explore consolidating, with the goals of becoming more efficient and pitching enterprise clients on end-to-end hardware/software/services offerings.
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
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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