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EMC Up on Oracle Buyout Rumors

NEW YORK ( TheStreet) -- Shares of EMC (EMC) jumped as high as 5% in morning trading Thursday, after a report said Oracle (ORCL) could acquire the storage equipment maker.

Rumors began circulating after a Citigroup analyst report issued Wednesday pegged EMC -- as well as BMC Software (BMC), Cerner (CERN), F5 (FFIV) and Mellanox (MLNX) -- as potential targets for Oracle. EMC is a "long shot," the report said.

While a deal with Oracle is possible because of EMC's attractive storage business, EMC's 80% stake in virtualization software company VMWare (VMW) might add complications, Avian Securities analyst Matt Bryson said. EMC has traditionally taken a "hands off" approach with VMWare, and Oracle "might have a hard time with [that]." Oracle has also made investments to build up its own virtualization platform, and VMware would be "a dead expense," he said.

If Oracle decided to buy EMC, it might consider divesting VMWare, Bryson added.

Bryson also deemed other rumors circulating about a combination between Microsoft (MSFT) and EMC as implausible. "Could Microsoft be interested in VMware?" he said. "That's more interesting, but not EMC as a whole."

Data storage companies have already seen a string of buyouts in the last few months, including HP's (HPQ) $2.35 billion acquisition of 3Par in September, and IBM's (IBM) purchase of Neteeza for $1.7 billion.

EMC and Oracle could not be reached for immediate comment.

In midday trading, EMC was up 3.74% to $21.06 and Oracle was down 1.4% to $28.20.

--Written by Olivia Oran in New York.

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