EMC’s Tucci: I haven’t talked to Elliott. Yet.

3 Comments

Credit: EMC

If EMC CEO and Chairman Joe Tucci is sweating over Elliott Management’s unsolicited interest in the company, he’s not showing it — not that anyone would expect that. Tucci is nothing if not unflappable.

Earlier this week, the news emerged that Elliott — an activist stock picker — had taken a $1 billion dollar stake in the storage maker. The immediate take was that it would push for a break up of an EMC-led federation that includes VMware(s vmw), VCE, RSA, and Pivotal — all of which are partially owned by EMC and one of which (VMware) is publicly traded.

On the earnings call, Tucci said he hasn’t talked to Elliott but planned to do so. He noted:

“First, I want to make it clear, other than speculation I have read in the press I have not met with anyone from Elliott. In my whole life I’ve never met with anyone from Elliott. I really do want to hear what their proposals are. And I’m sure they would like to hear our plans as well that we have presented to our other shareholders.”

He agreed (obviously) that  EMC has tremendous assets. “Pivotal bookings basis are [sic] up almost 60 percent, VMware was up 17 percent, VCE up north of 50 percent,” he said.

emc federation

But he reiterated his view that the federation pieces are better as part of a bigger whole than they would be as independent entitities.

“We operate under the principal of strategic alignment. When we plan our strategic alignment we do plan some overlaps. Do we get some flurry in the field when we do this bit of overlap…sure…but I think that’s healthy…Customers want more cooperation, not less. Our strategic relevance and the opportunities that we are getting, the opportunities that [VMware CEO Pat Gelsinger] is getting, these are fantastic. We will absolutely listen, but I’m answering the question the best I can.”

For its second quarter, EMC posted a non-GAAP profit of $0.43 per share, meeting most estimates. Revenue was $5.9 billion, up five percent year over year. VMware, which announced its second quarter earnings Tuesday, logged revenue of $1.46 billion, up 17 percent year over year, and earnings of $0.81 per share, which beat analyst estimates of $0.70 per share. EMC owns 80 percent of VMware, which last year accounted for nearly a quarter of EMC revenues and two-thirds of its market cap ($40 billion out of $58 billion).

When it comes to Elliott’s sit-down with Tucci, its argument will likely be that unshackling VMware from EMC would help both companies do better because they won’t have to worry about competing with a family member.

Note: this story was updated at 10:46 a.m. PST to reflect that of the federation companies, only VMware — as well as EMC — is publicly traded.

3 Comments

Matthew Lewis

Barb, in paragraph two you mention that RSA is publicly traded. Unless they split, re-listed, and I missed it; they haven’t been publicly traded since EMC acquired them. The RSA unit is run as a separate unit but under the EMC umbrella, thus the name – RSA, the Security Division of EMC. Otherwise, interesting read. Will be interesting to see what happens, if anything.

Barb Darrow

ah you are right @matthew…i looked up RSA ticker and found one — but it’s the wrong RSA. Thanks for the eagle eye. will correct the reference.

Keith Townsend

I wouldn’t mind seeing VMware decoupled from EMC. VMware is a disruptive company by nature. VSAN is a very good 1.0 product and I’d be interested to see where it would go if they could compete more directly with EMC.

I don’t understand the complete value prop for shareholders or customers. There may be some advantage in R & D but I believe it’s outweighed by the shackles of avoiding competition.

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