Billionaire activist investor Paul Singer of Elliott Management purchased EMC (EMC) and now is urging it to spin off its 80% stake in VMWare (VMW). However, a Stifel analyst is not sure that this is a move shareholders will accept or is good for both companies. The reason VMWare has remained so close to its parent company is that there are synergies and “cross pollination” between the two companies. The Stifel analyst thinks, working together, the companies can more easily sell products to each others’ customers.
It is rumored the Hewlett-Packard (HPQ) might buy VMWare, another move that the Stifel analyst thinks stockholders will question. CEO of VMWare, Joe Tucci’s employment contract expires in 2015, which could also affect the company’s decision-making.
While Stifel questions Singer’s strategy with regard to EMC and VMWare, the activist investor’s influence is a positive. “While we believe that believe that EMC will be willing to spin off its 80% stake in VMWare (with 97% voting rights) we believe Elliott Management’s involvement could continue to remain a positive catalyst in shares.”