According to a Reuters report that references a person familiar with the company’s thinking, EMC Corporation (EMC) does not plan to sell its 80% stake in VMware Inc (VMW) despite pressure from Paul Singer-run activist hedge fund Elliott Management Corp.
The publication also said that its source described as inaccurate a Thursday report in the New York Post that suggested EMC had decided to explore selling its stake in software maker VMware, and that Hewlett-Packard (HPQ) may be a possible contender for snapping up the company.
In July, Singer became EMC’s fifth-largest shareholder when he revealed a $1 billion stake in the firm. After the acquisition, he urged CEO Joseph Tucci to spin off VMware, saying that the company’s present structure has hampered stock performance and that the move could substantially boost the value of the two assets.
According to the report, Tucci refused, saying Palo Alto-based VMware is one of EMC Corp.’s “most strategic assets.”
Reuters also notes that at a Citi investor conference last week, David Goulden, the CEO of EMC’s information infrastructure division, stated the company wants to hold on to VMware.
“If we separate it, we would actually destroy value,” he said, according to a transcript of the Sept. 3 event. “It wouldn’t be as efficient a mechanism and it wouldn’t be as strong a competitor in the marketplace as we are today.”
About 10 years ago, EMC paid $635 million for its stake in VMware, which is currently worth $41 billion.
Shares of EMC were flat in extended trading Thursday at $29.69, while shares of VMware were down 68 cents at $96.69.