After EMC, Which Top Storage Stock Is the Next Big M&A Target?

Oppenheimer notes that after a big deal like this, it is important for investors to think about the possible implications of a transaction for the other vendors in the industry. Not only who may get acquired, but who needs to make an acquisition, as well as who benefits from the Dell-EMC deal.

Cisco Systems Inc. (NASDAQ: CSCO) may have to make a play as a result. While the analysts are adamant that they think Cisco doesn’t want to be in the storage arena, they feel the networking giant could get forced in if the company’s partnership strategy gets scrutinized after the loss of EMC/VCE as a market partner. Cisco was trading on Monday at $27.87.

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Citrix Systems Inc.’s (NASDAQ: CTXS) position may depend on how much of VMware the combined Dell/EMC entity controls after the deal. The Oppenheimer team thinks that the more that VMware is controlled by the Dell/EMC tech giant, the more opportunities that could be available for Citrix to partner with other storage vendors. Conversely, if Dell/EMC owns less of VMware, it could force Citrix to consider its own strategic alternatives. Citrix Systems was trading on Monday at $75.79.

NetApp Inc. (NASDAQ: NTAP) and HP Enterprise, the soon-to-be spun off segment from Hewlett-Packard Co. (NYSE: HPQ), could both benefit as, during the giant integration of Dell/EMC, they may not only lose corporate focus they could potentially lose engineering talent. With that in mind, the analysts do point out that due to the lack of scale independently, it could potentially hurt both vendors longer term to grow their data-center business and footprints. NetApp was trading midday Monday at $33.10.

The big winners in the deal could very well be the emerging storage vendors, and the Oppenheimer team cites Nimble Storage Inc. (NYSE: NMBL), which was trading on Monday at $23.75, and a brand new initial public offering, Pure Storage Inc. (NYSE: PSTG), which was trading up big on Monday at $18.02, as solid candidates. The analysts also list a host of private companies that could get a big look as well. They include Nutanix, SimpliVity, Tegile, Tetri and others.

The bottom line is a huge deal like this always stirs the pot, and Oppenheimer makes it clear it thinks change is on the way and an EMC/Dell combination could spark a consolidation trend across the sector. Clearly the emerging storage vendors could possibly end up as the big winners, and they also could be the stocks that aggressive accounts want to focus on.

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