A Reuters report suggests that EMC is exploring selling its 80 percent stake in VMware and tech firms such as HP and IBM are the likely suitors.
The report – quoting an article in New York Times –said that Paul Singer-run hedge fund Elliott Management is putting lots of pressure on EMC, a data storage products vendor to exit from its software unit VMware.
Last month, HP Chief Executive Meg Whitman said the IT enterprises company was assessing its software business in view of an industry migration toward Internet-based or cloud software and could make acquisitions if needed.
“If VMware is spun-out, we would expect this software company to become a prime acquisition candidate for the likes of IBM Corp, HP, or other larger technology stalwarts,” said FBR Capital Markets analyst Daniel Ives.
The report said EMC had resisted early pressure from Elliott Management to spin off VMware, saying that keeping the companies together helped win business.
But EMC Chief Executive Joe Tucci said in July that he agreed with Elliott that EMC was undervalued and was ready to meet the hedge fund to hear its proposals.
The $24 billion hedge fund has invested more than $1 billion in EMC with an aim to push it to spin off VMware.
Elliott has a history of buying stakes in technology companies and pushing managements to make changes to benefit shareholders. The fund already owns stakes in Juniper Networks and Riverbed Technology, among others.
EMC bought VMware in 2004 for $700 million. VMware accounted for about 22 percent of EMC’s revenue of $23.2 billion in 2013.