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TechEMC Federation

EMC may tighten its grip on VMware, much to Elliott Management’s chagrin

Barb Darrow
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Barb Darrow
Barb Darrow
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Barb Darrow
By
Barb Darrow
Barb Darrow
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August 3, 2015, 5:22 PM ET
Key Speakers At The Oracle OpenWorld 2013 Conference
Joseph "Joe" Tucci, chief executive officer of EMC Corp., speaks during the Oracle OpenWorld 2013 conference in San Francisco on Sept. 24, 2013. Photograph by David Paul Morris — Bloomberg via Getty Images

Talk about contrarian. For months EMC (EMC) chief executive Joe Tucci has resisted pressure from Elliott Management to sell EMC’s majority stake in VMware(VMW). Now, with a stand-still agreement between EMC and Elliott set to expire next month, EMC is reportedly eying a slightly different plan of action: It may just buy up the part of VMware it does not already own, according to Re/Code.

The report cites comments Tucci made last month about how tighter alignment between EMC and VMware could save up to $1 billion annually. Elliott Management, which puts the “active” into the the phrase activist investor, has argued quite strongly that selling off VMware will maximize shareholder value. So far the only big EMC sell-off has been that of Syncplicity, not VMware.

Elliott Management, founded and led by Paul Singer, has induced big changes at tech companies. Last week’s news that Citrix CEO Mark Templeton is retiring was seen as Elliott’s handiwork. Heck, the company has even taken on foreign governments.

But thus far it hasn’t gotten Tucci to blink.

Tucci’s stance has been that his hand-assembled EMC Federation comprising EMC itself, VMware, VCE, Pivotal and RSA Security—lets each company compete on its own merits but also offer integrated products.

But the federation is a bit fluid. For example, EMC joined with Cisco(CSCO) and VMware 6 years ago to launch VCE as a joint venture to build converged storage and compute appliances. But as Cisco started butting heads with its partners, the partnership fractured. That all ended with. EMC bought out Cisco’s stake in VCE last fall.

Fortune reached out to EMC for comment and will update this report as needed.

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Barb Darrow
By Barb Darrow
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