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EMC's Goulden: Despite Activist Pressure, Breaking Up Is Wrong Thing to Do (Video)

The data storage giant is embroiled in an ongoing wrangle with activist hedge fund Elliott Management.

Alex Ulreich for Re/code

EMC is facing strong pressure to spin off its stake in its VMware unit, but President David Goulden said his company is determined to keep its complex corporate structure intact.

“We believe strongly that breaking up is the wrong thing to do,” Goulden said in an interview at Re/code’s Code/Enterprise Series event at the Steelcase WorkLife Center in New York Tuesday evening.

The data storage giant is embroiled in an ongoing wrangle with an activist hedge fund that has pressed the company to spin off its controlling stake in the software company VMware.

Elliott Management, the hedge fund controlled by billionaire investor Paul Singer, owns about 2 percent of EMC’s shares. The firm has argued that the best way for EMC to create value for its shareholders is to spin off VMware; the firm criticized EMC’s unusual federation structure as a “company of companies.”

Elliott and EMC struck a standstill agreement in January that provided some time for EMC but it expired on Sept. 1. Currently, there’s no resolution.

Goulden defended EMC’s unusual federation structure, saying VMware wouldn’t have grown into the $6 billion company it is today without investments from EMC. It acquired VMware in 2003 when it was a startup, and spun out a portion of its shares as a publicly held company in 2007.

He also said the structure gives customers the freedom to only work with the units they see fit but, conversely, just one number to call if they do decide to consolidate vendor relationships under one corporate roof.

“There’s clearly some level of complexity” for investors, he said, “but we think what we gain from having the model outweighs it by orders of magnitude.”

What will EMC do to satisfy Elliott while still keeping the federation together? Goulden isn’t saying.

Goulden is the CEO of EMC’s information infrastructure business unit, the biggest portion of the federation that includes its main business of selling equipment used to store information in corporate data centers, and which accounted for $18 billion in revenue last year. Previously, he was EMC’s COO and is considered a possible successor to current EMC CEO Joe Tucci, who has been working without a contract since February and is expected to retire by the end of the year.

Does he want to be CEO? “The short answer is that the timing and the selection of a CEO, that’s up to the board of directors,” Goulden said.

“As it relates to me,” he added, “I love my job, it’s a great job, the best one I’ve actually had and I want to help the federation in any way I can to make sure it stays in the winner’s column. Beyond that you’ll have to get back to the board on how they’ll manage the process.”

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