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Will someone buy EMC to get to VMware?

No its not me guessing this time but Eric from Barrons. My take: It might be ...yes..you guessed it...GOOGLE!

His conclusion: EMC is becoming vulnerable to being acquired for its VM stake. “We assign an increasing probability to the scenario that EMC could become a vehicle for a take-out of VMware within the next year,” he writes, “given its controlling stake in VMware that trades at a significant discount.” He names IBM (IBM), Hewlett-Packard (HPQ), Cisco (CSCO), Oracle (ORCL) and Microsoft (MSFT) as “potential suitors that make strategic sense.”

Bracelin says the huge increase in VMware shares since its August 15 IPO at $29 has been created in part by scarcity value, with only 10% of the stock in the float. Nonetheless, he says there is still a “material disconnect” between the value of EMC and VMW. He says a discount to the market value of EMC’s stake is reasonable, but thinks the magnitude has become overdone. Without discounting VMW’s shares, the market price implies a 56% drop in the value of core EMC since the VMW initial offering.


MY TAKE:

It makes no business sense whatsoever for IBM, Oracle, HP, Cisco or Microsoft to take EMC. WHY? VMware is up ready to devour EMC and will do the same with the others.

  • HP, IBM: No go. VMware must remain storage independent as storage virtualization becomes very crucial and with other storage vendors, even the likes of Maxtor etc start coming with cheap iSCSI solutions, this market will suddenly explode and storage solutions from HP like EVA etc might be looking for a means to survive. Expecting VMware to add any value to theirs would be a bit too "quixotic"!
  • Oracle: Not a chance. It has too many after-burps from its past acquisitions to deal with and a disruptive technology with a lean and mean workforce is something they will not be able to manage. And culture differences are way too big among these firms.
  • Cisco: Same as storage, network virtualization has not really come of age. Sure there are solid solutions from Cisco, Juniper etc but again there are open source solutions like Vyatta etc who are still coming up with offerings and to keep a neutral position and allow other strat-up network vendors, working with Cisco will not only diminish Cisco's own value but it might also overshadow Cisco's future stance.
  • Microsoft: Cultures just don't match up. They have attempted to get VMware in the past and not many in the Microsoft camp are sure if such a disruptive vendor is a healthy thing to happen to Microsoft when its own battles of moving their flagship products like Servers to "Cloud OS" or "Web OS" and soon "Web VMs" via VaaS will already power the internet and user/business community.
So here comes my conclusion and Diane Greene would agree to it:

Accept VMware as it is. They have grown not because the idea was revolutionary (evolutionary actually, if you ask me) but because it got powered up by the user community. VMware might make a move but it needs to be able to decide itself and not be decided upon! There are a lot of things to be done and the work is far from done. VMware may want to free itself soon but that is just about it for now. EMC has been a great umbrella to have worked under.

And BTW, It is not VMware we should be talking about, but its Citrix that needs a buyer.

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Comments

  1. Cisco already owns part of VMW. Probably lets them know about new developments before the competition, more leverage for lower costs for VMW software. Have you noticed that EMC is using some of the money from taking VMW partially public, to hire more techies?

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