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EMC's Tucci will meet with investors but resists break-up

EMC CEO Joe Tucci today said he plans to meet with the investor group reportedly calling for the storage conglomerate to break itself up, although he maintained that his company benefits from its current structure.

Earlier this week, news reports said Elliott Management Corp. has taken $1 billion-plus stake in EMC (around two percent of the company) and would like to see it spin off parts, particularly its majority-owned VMware.

“We have not heard from Elliott Management other than a call to us saying they intend to be one of EMC’s largest investors,” Tucci said during EMC’s earnings call. “I have agreed to meet with them. We are always open and welcome a dialog with all of our shareholders, and we respectfully listen to their ideas beliefs as we form our strategic direction. … I want to hear what their proposals are, and I’m sure they would like to hear some of our plans.”

EMC’s earnings of $5.9 billion last quarter were slightly ahead of expectations, and Tucci said during the call that customer surveys show “our strategic relevance has never been greater and is rising.” He also said EMC would accelerate its share buyback and buy $3 billion of stock in 2014 instead of the previously planned $2 billion.

EMC Federation owns VMware, RSA Security and Pivotal, all which play largely outside of EMC’s core storage market. The Wall Street Journal and New York Times reported this week that Elliott will push EMC to break off some of those pieces to increase overall shareholder value.

Tucci said he agreed with Elliott that EMC stock is undervalued but expressed doubt that spinning off any pieces – especially VMware – would make the EMC Federation more valuable. He pointed out large competitors such as IBM, Cisco and Oracle also have products and services spanning the IT spectrum.

“Without a doubt, we have great assets and strong strategic vision – splitting them up, spinning out one of our most strategic assets – I don’t know of another technology company that has done that and been successful,” he said.

Calls to break up EMC are not new. Tucci made a strong case for EMC’s holding on to the 80 percent of VMware that it owns in May at an investor conference, claiming the EMC companies were “better together.”

EMC’s storage revenue increased one percent over last year, with its high-end enterprise storage down 14 percent. Tucci and EMC storage CEO David Goulden said they expect the recent launch of the new VMAX platform to raise enterprise sales by the end of this year.

“The pause ahead of this product (new VMAX) was hurting us,” Tucci said.

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