Analysts Mixed On EMC Corporation Rumor To Sell Stake In VMware, Inc.

Shares of VMware, Inc. VMW and EMC Corporation EMC drifted downward during Thursday's session as investors digested a rumor EMC Corporation’s might be looking to sell its stake in VMware Inc.

Mid-way through the trading session, a headline from Reuters cited a source close to EMC as saying the company is not considering selling its stake in VMware.

VMware and EMC shares were largely unaffected by this headline as the stocks had been trading well off session highs for some time, implying the Street might have already been skeptical of the rumor. Volume, it should be noted, did spike slightly on the Reuters report.

Analysts offered a spectrum of views related to the rumor.

On one side, Wells Fargo's Maynard Um, cited in a Bloomberg article, suggested the deal is flat out unlikely to go through. Um noted the “VMware sale would not be tax-free and the acquisition of EMC’s share of VMW would be large for potential buyer Hewlett-Packard.”

When Benzinga reached out to FBR’s Daniel Ives, the analyst pointed at the likely frustration of current EMC shareholders given the current ownership structure, but warned “the jury is still out” and suggested “it is too early in the process to be sure” if a deal will be done. If a deal were to be done, Ives believes EMC would likely spend the cash on a buyback or used to strengthen its presence in the Internet security space.

On the other side of the spectrum, UBS analyst Steven Milunovich highlighted the New York Post’s surprising accuracy on M&A. He increasingly believes “something is up.” Furthermore, “HPQ combination with EMC makes sense strategically in order to create a stronger enterprise vendor,” Milunovich said.

Shares of VMware closed Thursday’s session at $96.70, down 0.7 percent; EMC shares closed at $26.69, up 0.64 percent.