EMC Analysts Not Expecting A Spinoff

EMC Corp EMC is in the news Monday as Elliot Management Corp. is pushing to have the data firm spinoff its VMWare VMW computer-server software division.

Elliot Management owns nearly 80 percent of VMWare. Analysts covering EMC agree a spinoff would not be beneficial to EMC.

Oppenheimer analyst Ittai Kidron said, "Elliot could be the catalyst for EMC to be more aggressive in capital allocation or pursue material cost cutting."

Kidron continued by touching on the fact that none of the other major players (Oracle, Hewlett-Packard and Cisco) would step in and buy VMWare.

RBC analyst Amit Daryanani sees a higher probability of EMC buying the remaining stake in VMWare instead of spinning it off. Janney analyst Bill Choi said VMWare is a "major strategic asset" for EMC and the company would "loathe" to get rid of it. Choi sees the possibility of a dividend raise or share buyback occurring instead of a spinoff.

Deutsche Bank analyst Sherri Scribner believes Elliot sees EMC's "federated" organization structure as inefficient; with CEO Joe Tucci's employment contract ending, Elliot may see an opportunity, though Deutsche Bank thinks the process will be drawn out into 2015.

The bank has a Buy rating with a $32 price target as of Monday morning, according to a research note.

Bloomberg data shows EMC has 35 Buy recommendations, 10 Holds and 0 Sell with an average Price Target of $35.

Analyst Estimates and EMC Stock Price - Source: Capital IQ Data

Analyst Estimates and VMW Stock Price - Source: Capital IQ Data

Shares of EMC recently traded up 4.6 percent $28.24. VMW shares traded down 1.5 percent to $93.87.