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EMC undervalued? Not quite

Barron's Online came out with an August 20 article titled "An Unloved Store of Value" contending investors don't fully appreciate the value VMWare provides to EMC. At $18, the stock was undervalued the article contends, "EMC will benefit directly from VMWare's rising profits and will also enjoy gains in sales of storage-area networks, thanks to virtualization's growth. It could be a $22-$23 stock."

However, EMC has three other important business segments on top of the VMWare value. These businesses must be included in any EMC valuation, and, as we'll see, when everything is taken in as a whole, perhaps EMC is not undervalued, after all.

VMWare's Value
On August 14, 2007, 10% of VMWare's shares were sold by EMC through an initial public offering (IPO) at $29. This gave EMC $1.1 billion in cash before fees to the investment bankers. Since then, the price of VMWare's shares has risen to the $60 level, generating a very nice unrealized profit for all who owned shares in the company.

In July 2007, shares of VMWare were sold to Intel and Cisco. Each company was able to acquire their shares at a price lower than the IPO price. The primary purpose of these sales was to enhance the relationship of these companies in the virtualization software business, the mainstay of VMWare. It also turned out to be a good investment for Intel (Nasdaq:INTC) and Cisco (Nasdaq:CSCO) as shown in the table below.


Read on...

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Whale Fall
-----------------

Dress me up in my new threads
clasp my greasy palms
grease my hair
I'm ready for the fall


Watch at all the decadence
watching the avalanche
I'm slipping down
losing my buoyancy


What's become of us
where have we come
this far, this close
close to the doors


I hear them, sublimal chants
I'm on the run
I race through the human sea
I am the king!


I'm the slave
to my own undoings
I'm the jester in my courtyard
We jest as we run


We're strolling on that thin rope
we grope as we rope
we're true heros
we're the survivors


we're the scavengers
we're the friends
we're the lovers
we're the unbred


Soon awaiting the fall
we're lurking on us
we're osedaxing us
we're soon going to be done
we'll soon be arrested




*osedax(bone devourer, newly discovered marine genus) feeds on a fallen(sunken) whale carcass(which is also called a whale fall). Read more here