Downstream Merger With EMC 'Off The Table' At VMware

• VMware, Inc VMW shares are down 20 percent in the past year, and are trading close to the low end of their 52-week range of $73.65 - $99.71.
• Baird’s Jayson Noland upgraded the rating for the company to Outperform, with a price target of $95.
• The company’s strong positioning in the software infrastructure segment and its current trading range make it an attractive investment option, Noland said.

VMware’s CEO Gelsinger announced that the company was not seriously considering a downstream merger with EMC Corporation EMC. Analyst Jayson Noland said that this is a “relief for VMW shares.”

Gelsinger believes the Federation structure is the best path forward. “We continue to see potential for increased alignment with EMC and potentially a spin-in designed to drive improved cost and revenue synergy,” Noland wrote.

VMware expects its operating margin to expand to 32 percent in 2016. The company also noted a 12 percent cash flow from operations tailwind next year, due to the absence of some one-time items.

The company cited improved traction in several product areas. VMware launched several products, including the Unified Hybrid Cloud (UHC) management platform that is designed to deliver on all elements of the software-defined data center from on-premise to the public cloud. VMware envisions “singe plane-of-glass” management across any cloud, application or device.

Other product announcements by VMware included the EVO SDDC Manager as well as updates to vRealize, NSXNetworking, vSAN Storage, and vSphere compute.