This one is an interesting read. Here the columnist analyzes the IPO strategy of EMC. It is working well for them for now. But still investors need to get more than just excited. Read on...
Everyone agrees the VMWare business is worth a lot of money, but it's hard to get investors to fully recognize that value by plugging it into the stock price of EMC. This is not a unique problem; it happens at big companies with small but fast-growing subsidiaries.
A partial spinoff, like the VMWare IPO, is the textbook response to that problem. Analysts who examine VMWare's independent stock prospects place a value on the enterprise. Dollars to doughnuts, they will conclude the company is worth more than its old, presumed value as a wholly owned subsidiary. Hopefully, that richer value is plugged into Wall Street models that assess the parent's stock and -- voila! -- those shares climb. That's what the textbook says, anyway.
Read ahead.
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