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EMC merger intriguing but unlikely

There has been a lot of speculation about who will succeed Joe Tucci if the EMC CEO really retires next February as planned. The leading candidates were thought to be from inside the EMC federation of companies, most notably EMC information infrastructure CEO David Goulden or VMware CEO Pet Gelsinger.

Apparently the options to replace Tucci also include Meg Whitman, Michael Dell and other CEOs of large tech companies that are in talks to merge or acquire EMC, according to business publications and networks. The Wall Street Journal, Barron’s, New York Times and CNBC have all weighed in over the past two days, two weeks after the New York Post reported EMC was holding talks to merge or sell VMware.

This flurry of merger talk comes possibly from a person at large EMC shareholder Elliott Management, which has publicly urged EMC to split off VMware and perhaps other pieces. Or an EMC exec wants to make it known EMC is living up to its commitment to explore its options. In any case, there is talk happening but not necessarily any action.

The Wall Street Journal Sunday said EMC recently broke off talks to merge with HP in a deal that would make Tucci the chairman of HP while Whitman would remain CEO. Reasons cited for talks falling through include EMC asking for too much and lack of faith that both companies could get shareholders to ratify the terms. The Journal story said HP and EMC have broken off talks, although Barron’s today quoted a source saying talks could resume and “things feel imminent-ish.” According to the New York Times, a combined HP-EMC would have a market valuation of $129 billion.

The Journal story also claimed that EMC and Dell have had discussions. Dell might want VMware (what server company wouldn’t?) or select EMC storage products, but it is unlikely that Dell is big enough to absorb all of EMC.

Cisco and Oracle have also been mentioned as companies that might be interested in EMC.

Despite all the stories and all the possible suitors, it’s unlikely that EMC will be bought or merged. And Tucci has said he does not want to sell EMC’s 80 percent stake in VMware.

Buying EMC whole would be a major undertaking, and the companies mentioned have other issues to deal with in today’s challenging IT market.

For example, an HP-EMC merger would be disruptive to the storage groups in both companies. All HP storage products have direct competitors at EMC. HP would either have to dismantle its current storage portfolio or get rid of a bunch of products from both companies.

Cisco-EMC merger rumors pop up every couple of years. Cisco has been comfortable partnering for storage – mainly with EMC and NetApp – and has no track record of taking on large acquisitions.

Oracle is the wild card in this situation. So far, except for the StorageTek tape business it picked up in the Sun acquisition, Oracle’s only interest in storage is selling devices that improve performance of its software.

But with Larry Ellison pulling back to executive chairman/CTO and Mark Hurd and Safra Catz taking over as CEOs, the database giant could go in a different direction. Still, that would be a massive task as the CEOs and Ellison settle into their new roles.

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