Activist Investor Pushes For EMC Breakup; Partners, Analysts Weigh In


EMC's fifth-largest investor is reportedly pushing EMC to spin off VMware as an independent company, a move many solution providers would support as a way to help VMware become a premier provider of cloud technology independent of the influence of any legacy hardware vendors.

The Wall Street Journal on Sunday reported that New York-based activist investor Elliott Management has acquired a stake of over $1 billion in EMC, making it EMC's fifth-largest investor and giving it the clout needed to try to convince the storage giant to spin off VMware cloud and virtualization developer.

Elliott Management, which the Journal said has about a 2-percent of the vendor's equity value of about $55 million, plans to argue that the "EMC Federation," which includes EMC, VMware, big data and business analytics software developer Pivotal, and security developer RSA hampers the performance of EMC's stock.

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The EMC Information Infrastructure legacy storage solutions form the largest part of the company's business while VMware and Pivotal are growing much faster.

EMC and Elliott Management spokespeople did not reply to requests for more information. A VMware spokesperson wrote in an emailed response to CRN that VMware does not comment on rumors or speculation.

Investors seem to like the idea of an EMC breakup. EMC share prices were up nearly 5 percent at the midpoint of the trading day on Monday at over $28 per share. VMware shares, however, were down about 2 percent at just over $93 per share at the same point in the trading day.

VMware, which is a publicly-listed company despite being 80-percent owned by EMC, is expected to discuss its second  fiscal quarter 2014 results on Tuesday afternoon of this week. EMC early Wednesday morning will follow with its own second  fiscal quarter 2014 results.

VMware in early 2004 was acquired by EMC.

Spinning off VMware would only be good news, wrote Jed Ayres, chief marketing officer at MCPc, a Cleveland, Ohio-based solution provider and EMC channel partner, in an emailed response to CRN.

"I can definitely see benefits if the two disconnect as VMware has huge upside as a completely independent company…one that will be aiming square at the hardware around storage, compute and networking in the next 5 years. It would be great to see them in NO WAY impacted by a parent company that is tied to legacy hardware models," Ayres wrote.

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