EMC Rumors Change But Won't Die (EMC, CSCO, ORCL, VMW)

It seems as though there are now more market rumors of which company wants to buy other companies and which company has many companies considering an acquisition of the target than there are real legitimate news stories.  EMC Corp. (NYSE: EMC) shares are trading higher on renewed buyout rumors and renewed speculation.  Cisco Systems Inc. (NASDAQ: CSCO) was the rumored buyer earlier in recent months, but the rumors now point to Larry Ellison and Oracle Corp. (NASDAQ: ORCL).  EMC shares are up about 4% at $21.11 on more than double a day’s volume after only two and a half hours.  Ellison has said he would consider buying anything, and now that Cisco Systems Inc. (NASDAQ: CSCO) is so deep in the data center attack it seems as though anything is possible.

Ellison has consolidated just about every enterprise player out there and it has gone more and more into hardware now with the hopes of more and better one-stop integration.  It now has Sun Microsystems on top of its other merger empire.

For starters, EMC has a market cap of $43 billion its own.  This remote possibility of a merger would also leave a real question about the fate of the VMware Inc. (NYSE: VMW) super-majority stake that is held by EMC.  With Oracle’s virtualization efforts already at hand, this is a wild card that would confuse yours truly over what it would mean for the virtualization efforts that have already been seen.  VMware’s market cap is now $33 billion on its own, and we generally tally up EMC as owning 80% of that.

What would it take to acquire EMC on the surface?  At $43 billion, EMC won’t accept an at-the-money acquisition.  Does $50 billion get it done?  EMC would only be getting a 16% premium if so.

If anyone can integrate a company like EMC, Larry Ellison has a track record that is largely unrivaled.  The problem is that the same is true about Cisco Systems and John Chambers.  We have not heard this but both could easily have the nickname “Pac-Man” on their shirts.

EMC is also a company which traditionally has not been prey.  The company has made acquisitions.  Between Cisco and Oracle, there have to have been a few hundred companies acquired.  Some had products, some just owned technology.  Making a $50 billion integration would be no piece of cake for either one of these companies to do.  Still, we are finding out that anything is possible.

JON C.  OGG