EMC Investor Calls For VMware Spin Off
Elliott Management wants EMC to abandon federal structure with VMWare separation
EMC has been urged to spin-off VMware or consider other possible merger opportunities by shareholder Elliott Management Corporation, which wants to split the technology firm up in order to unlock what it perceives as hidden value.
Elliott, which owns a 2.2 percent stake in EMC, says the company’s strategy of combining four major business units into one, obscures the true value of each component and makes each less able to take advantage of new business and market trends.
These four units are its core storage business, enterprise security software developer RSA, cloud software developer Pivotal and virtualisation firm VMware.
EMC VMware separation
EMC is committed to retaining this structure, but recent reports have suggested it discussed a possible merger with HP for more than a year and has held talks with the likes of Dell about the sale of some assets. Adding to the uncertainty is the expectation that long-serving CEO Joe Tucci will step down in the near future.
VMware is believed to account for 80 percent of EMC’s value and any separation would boost the value of Elliott’s holding in the company, but EMC is believed not to be keen on this idea. In a statement, EMC said it was aware of Elliott’s letter and that it continues to evaluate its options.
“EMC’s Board of Directors regularly reviews and rigorously evaluates the company’s strategy with a view towards enhancing shareholder value,” said the company. “As part of this ongoing process, the Board welcomes open dialogue with EMC shareholders and values their constructive input.
“Over the past few months, EMC’s leadership has met with representatives of Elliott several times and has listened carefully to their ideas, as we do with all of our shareholders.”
Should EMC separate into different businesses, it would follow a recent trend in the technology industry. Last week, eBay announced it was spinning off its PayPal digital payments business, while HP is also dividing its hardware and service divisions into two different companies.
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