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NEW YORK (TheStreet) -- VMware (VMW) - Get VMware, Inc. Class A Report shares are down 2.93% to $78.84 in early market trading on Wednesday following reports that the company's downstream merger bid for majority owner EMC (EMC) is being given a second look by the company's board, according to Re/code.

The recent market downturn is responsible for the IT service provider's renewed consideration of the deal, which is known as a downstream merger, as EMC's stock has fallen 6.02% over the past two sessions including an 11% drop Monday.

VMware provides virtualization infrastructure solutions.

Re/code had previously reported that VMware CEO Patrick Gelsinger floated the idea of the takeover earlier this month. EMC currently owns about 80% of VMware.

Board members have also decided that CEO Joe Tucci must step down before the end of the year, according to the tech news service's sources.

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Tucci, who is currently working without a contract, has been opposed to the merger and would prefer to buyout the remainder of VMware's shares that EMC does not already own.

Though the purchase price and details of the transaction have not been finalized, VMware will reportedly issue about $50 billion worth of new shares, a portion of which would be exchanged of EMC shares, according to Re/code.

TheStreet Ratings team rates VMWARE INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate VMWARE INC (VMW) a HOLD. The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 11.9%. Since the same quarter one year prior, revenues slightly increased by 9.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • VMW's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, VMW has a quick ratio of 2.08, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for VMWARE INC is currently very high, coming in at 89.54%. Regardless of VMW's high profit margin, it has managed to decrease from the same period last year.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Software industry and the overall market on the basis of return on equity, VMWARE INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Net operating cash flow has decreased to $316.00 million or 22.73% when compared to the same quarter last year. Despite a decrease in cash flow of 22.73%, VMWARE INC is in line with the industry average cash flow growth rate of -29.21%.
  • You can view the full analysis from the report here: VMW Ratings Report