VMware mulling buyout of parent firm EMC - report

EMC board considering its options before chief exec Joe Tucci retires

EMC could be the subject of a buyout by its own subsidiary VMware, according to a report.

Re/Code cites people familiar with the matter who claim the storage giant is considering a so-called "downstream merger", which would see VMware issue new shares in exchange for those of EMC.

Rumours around the future of EMC have circulated furiously over the last year.

Some of the reported possible scenarios include: EMC selling VMware; EMC acquiring the whole of VMware (it currently owns 80 per cent); EMC selling VMware to HP; and even EMC being acquired whole by HP or Dell.

The firm has faced pressure to spin off VMware from activist investor Elliot Management, which recently took a pop at fellow IT firm Citrix after swallowing a glut of shares.

Re/Code claims the idea of VMware acquiring its parent firm is being supported by Elliot.

EMC is set up in a somewhat unusual "federation" structure which sees the overall EMC company act as an umbrella to EMC Information Infrastructure, VMware, big data firm Pivotal and security company RSA.

On a recent earnings call, EMC chief executive Joe Tucci faced questions from analysts about the benefits of such a set-up but insisted it is a good idea.

"I think splitting this federation or spinning off VMware is not a good idea," he said. "I firmly believe that we are better together – a lot better together."

EMC was not immediately available to comment on the claims about the rumoured VMware acquisition.