According to a Thursday New York Post report, which cites sources familiar with the matter, EMC agreed to sell or spin off its stake in VMWare due to pressure from activist investor Paul Singer of Elliot Management Corp. That report was refuted Friday by Reuters, which cited its own unnamed source.
What should investors make of this? Keep in mind that with EMC shares rising less than 10% over the past two years, which is well below the 40% gain of the S&P 500, management will continue to feel pressure to do something and unlock value for shareholders. Shares are at $29.65, up nearly 18% for the year to date.
Read More: 10 Stocks Carl Icahn Loves in 2014
VMware, which competes with Red Hat (RHT) and Microsoft (MSFT) , among others, specializes in software that allows users to operate in virtualized machine environments. VMware's technology helps corporations reduce costs and operate more efficiently, whether via data storage management or in the cloud.
Breaking off from VMware is something EMC has long resisted. EMC has maintained that keeping both companies together presents an added advantage that helps win business over the likes of Hewlett-Packard (HPQ) and NetApp (NTAP) .
It is, however, for this exact reason that Elliot Management believes VMware will be better off on its own. Elliot Management, which owns a 2% stake in EMC, argues that spinning off VMware would "boost the value of both companies."