Joseph ‘Joe’ Tucci, chairman and chief executive officer of EMC Corp., may respond to breakup appeal from Elliott Management.
Photo by Bloomberg—Getty Images
By Laura Lorenzetti
July 21, 2014

EMC (EMC), a provider of computer server and storage systems, is coming under pressure to break itself apart after Elliott Management revealed a $1 billion stake in the company.

Elliott’s investment comes to about 2% of EMC’s $55 billion market value and makes it the software company’s seventh-largest shareholder, according to Bloomberg data.

The investment management firm is leveraging its position to sway EMC to spin off VMware (VMW), a publicly-traded software maker that is 80% owned by EMC. Elliott believes the Hopkinton, Mass.-based company would get a substantial stock price boost from the sale, reported The Wall Street Journal.

EMC sales have slowed in recent years, and its shares have trailed the S&P 500 index over the last 12 months. EMC gained almost 7% versus a 16.7% rise in the benchmark index in the last year. The company will report second-quarter results Wednesday.

An EMC spokesperson was not immediately available for comment.

EMC spun off Pivotal, an enterprise IT company, 18 months ago and runs the business in a similar way to VMware. Pivotal CEO Paul Martiz spoke at Fortune‘s Brainstorm Tech conference last week and referenced the spin off as “a repeat in a different for of the VMware play.”

While there hasn’t been mention of also breaking off the newer Pivotal business, it could provide activists another reason to drive a sell-off of VMware since EMC could still maintain a presence in the enterprise-software arena.

Martiz’s full conversation with Fortune‘s Adam Lashinsky can be heard below.

An earlier version of this story incorrectly stated that EMC had a market capitalization of $55 million. The company has a market cap of $55 billion.

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