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EMC Has No Plans to Sell VMware Stake

"No truth to the rumors" in the New York Post, sources say.

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Shares of data storage and IT giant EMC rose by as much as one percent today after a report in the New York Post said the company was exploring the sale of its majority stake in cloud software firm VMware.

The trouble with the report is that it’s not true. Sources familiar with the matter told Re/code emphatically today that there is “no truth” to rumors that EMC is contemplating a sale or spinoff of VMware.

Shares of VMware fell by 68 cents, or less than one percent. EMC shares closed up 19 cents at $29.69.

In a story citing “a well-placed source familiar with the situation” — a story that incorrectly describes what each company does — the Post said that EMC had warmed to the idea, which was initially floated by an activist shareholder firm in July.

That was when Elliott Management, a firm controlled by billionaire Paul Singer, disclosed that it had bought a stake in EMC amounting to about two percent of its shares outstanding and intended to push for a breakup of EMC and VMware.

Sources told Re/code that EMC management has met with representatives from Elliot, but they declined to describe the outcome of the meetings.

CEO Joe Tucci said on July 23 that he’s “always open” to a dialogue with shareholders and would “respectfully listen to their ideas and beliefs.” But since then, the company has remained pretty steadfast in its view that EMC remain in its current corporate structure, which it calls a “federation.” EMC controls VMware, as well as security software firm RSA and big data software firm Pivotal.

At the Citi Global Technology Conference on Sept. 3, David Goulden, CEO of EMC’s Information Infrastructure unit — basically Joe Tucci’s No. 2 — defended the arrangement. “We believe that there are real synergies and real benefits, hard dollar benefits, in having VMware [as part of] EMC, and Pivotal and VMware and RSA in the same company,” he said, according to a transcript of his remarks. “And we believe, if we separate we would actually destroy value by doing so. It wouldn’t be as efficient a mechanism and it wouldn’t be as strong a competitor in the marketplace as we are today.”

The main focus of Elliot’s argument is that it would be better for EMC shareholders if it were to cut VMware loose in a spinout or sale. Elliott has a way of making things happen at the companies in which it invests. Earlier this year, it launched a campaign to shake up Juniper Networks. The company responded with a new operating plan.

This article originally appeared on Recode.net.

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