Argus Downgrades EMC: Here's Why

• EMC Corporation EMC shares have increased 13.7 percent in the past one month, reaching a high of $28.28 on October 12.
• Argus’ Jim Kelleher has downgraded the rating on the company from Buy to Hold.
• EMC Corp has entered into an agreement to be acquired by Dell, Inc. DELL and its partners, and Kelleher believes that EMC shares would trade based on M&A speculations till the deal is closed.

According to the Argus report, “EMC shareholders are expected to receive total consideration of $33.15 per EMC share, including $24.05 in cash and 0.111 share of a tracking stock linked to EMC's economic interest in VMware, Inc. VMW.”

VMware will continue to be an independent, publicly traded company, while EMC Corp would be taken private, becoming a part of Dell.

“During a post-announcement conference call, executives of EMC, Dell and VMware stated that the potential for revenue synergies rather than cost synergies were driving the deal,” Kelleher reported.

Kelleher also mentioned that the CEO of EMC Corp, Joe Tucci, “amid unprecedented technology industry disruption, EMC's older products were tailing off more rapidly than earlier anticipated.”

Kelleher believes that this could have provided further incentive for this deal, which has come at a time when other top IT companies have been going through “shake-ups.”