EMC Gets Einhorn Investment, Adding to Activist PressuresBeth Jinks
EMC Corp., which is facing calls from activist shareholder Elliott Management Corp. to spin off its software company VMware Inc., has attracted another outspoken hedge fund.
Greenlight Capital Inc., the $10 billion firm run by David Einhorn, today disclosed a new “medium-sized” stake in EMC. The hedge fund said Hopkinton, Massachusetts-based EMC is trading at a “sizable discount to the sum of its parts” because of its structure, where businesses ranging from enterprise storage, software virtualization and cloud infrastructure trade under the parent company.
“These businesses essentially operate as independent companies, but trade as one under EMC’s corporate structure,” Einhorn wrote in a letter to Greenlight investors today. “EMC management acknowledges that the combined business trades at a discount and has recently committed to trying to address it in early 2015.”
Dave Farmer, a spokesman for EMC, declined to comment.
Einhorn’s investment increases the scrutiny that EMC, the world’s biggest maker of storage computers, is under from activists. EMC is structured in an unusual way that obscures shareholder value, Elliott said Oct. 8 in a public letter to the company. The activist investor has been agitating behind the scenes since at least July for a spinoff of VMware and for EMC to seek strategic buyers for its remaining businesses, people familiar with the matter have said.
Even before Elliott began calling for EMC to break itself up, the company’s board began a strategic review ahead of the planned retirement by February of Chief Executive Officer Joe Tucci, people familiar with the matter have said. As part of that evaluation, the company has considered spinning off or selling VMware and held talks about a merger with Hewlett-Packard Co., a discussion that stalled over price, the people said.
New York-based Greenlight, best known for profiting from declines including Lehman Brothers Holdings Inc. before the bank collapsed in 2008, said in today’s letter that it’s also increasing wagers against another group of technology stocks, criticizing the lack of profitability at online retailer Amazon.com Inc.
Shares of EMC rose less than 1 percent to $29.04 at the close in New York, while VMware, which is also publicly traded, also increased less than 1 percent to $83.71.
EMC “welcomes open dialogue” with its shareholders and “values their constructive input,” the company said in an Oct. 8 response to Elliott’s public letter. “Over the past few months, EMC’s leadership has met with representatives of Elliott several times and has listened carefully to their ideas, as we do with all of our shareholders.”
Greenlight and Elliott’s investments come amid a trend of technology companies carving themselves into pieces to boost value. EBay Inc. said on Sept. 30 that it would separate its PayPal digital-payments unit and marketplace business into two companies. Hewlett-Packard has announced it will break into two companies, spinning off the PC and printers unit into one entity and the corporate hardware and services arm into another. Symantec Corp. is also splitting its business into one that sells security programs and another that provides data storage.
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