NEW YORK (TheStreet) -- Shares of EMC Corp. (EMC) are up 1.53 to $29.95 in pre-market trade after it was reported that the data storage products maker will explore selling its stake in software service company VMware (VMW) , the New York Post reports.
The decision to consider putting the unit on the block means Joe Tucci, EMC's chairman and CEO, has given in to billionaire Paul Singer's pressure, sources told the Post.
Singer's Elliott Management has reported a 2% stake in EMC and has been pressuring it to exit its 80% stake in VMware, the Post said.
Hewlett-Packard (HPQ) is a possible VMware buyer, a source said.
EMC, while weighing the sale of the stake, may also look to put another asset or assets on the block, another source said.
EMC bought VMware for $600 million in 2004, which has made it a very successful investment over time, the Post added.
VMware shares are up 0.89% to $98.25 in pre-market trade.
TheStreet Ratings team rates EMC CORP/MA as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate EMC CORP/MA (EMC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, expanding profit margins, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although EMC's debt-to-equity ratio of 0.25 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.12, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for EMC CORP/MA is rather high; currently it is at 69.98%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.00% trails the industry average.
- Net operating cash flow has slightly increased to $1,254.00 million or 2.10% when compared to the same quarter last year. Despite an increase in cash flow, EMC CORP/MA's cash flow growth rate is still lower than the industry average growth rate of 35.74%.
- EMC CORP/MA's earnings per share declined by 12.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EMC CORP/MA increased its bottom line by earning $1.33 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($1.91 versus $1.33).
- You can view the full analysis from the report here: EMC Ratings Report