EMC Loses on Lack of Cisco Interest (EMC, CSCO, VMW)

EMC Corporation (NYSE: EMC) is having a rough day, yet it is on no news of its own.  The blame lies with Cisco Systems Inc. (NASDAQ: CSCO) after its earnings.  Is it competition?  Is it industry comments?  Is it fears of a rift growing?  No.  It is because John Chambers of Cisco said that he is not really in favor of very large acquisitions at this time and that he’d rather focus on smaller mergers.

The issue is that there have been some market rumors that Cisco wantedto acquire EMC for its storage solutions and storage client base sothat it could grow its physical infrastructure presence further aroundthe clouds of communications and technology infrastructure.  It turnsout, just like many rumors, that the rumors based more on hopes thanthey were on any real meat.

At the forefront would have been the prized VMware Inc. (NYSE: VMW)which is still more than 80% owned by EMC.  At this point Cisco couldhave taken two paths.  It could have owned the virtualizationplatform.  After all, it did acquire roughly 1% of the company beforethe 2007 IPO of VMware.  The other issue is that Cisco could have soldoff the entire stake to finance the buyout of EMC on top of EMC’s cash.

For now, this all seems a moot point.  EMC shares are down almost 5% at $14.28 and Cisco stock is up almost 5% at $23.73.

Jon C. Ogg
August 6, 2008