Time for EMC (EMC) to Make A 'Bold' Acquisition - Summit Research (SYMC) (NMBL)

April 2, 2015 9:59 AM EDT
Get Alerts EMC Hot Sheet
Price: $25.18 -1.37%

Rating Summary:
    14 Buy, 25 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 11 | Down: 14 | New: 51
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Summit Research affirms its Buy rating and $34 price target on EMC Corp. (NYSE: EMC) following the company's recent analyst day.

Analyst Srini Nandury noted that he is covering potential acquisitions within three segments: Security, Analytics, and Networking. The analyst commented:

  • Feeling the Pressure Of Activist Investors: As EMC stock’s languishes, (down 8 percent since the analyst day, versus down 1 percent for the S&P), we believe management is feeling the pressure to do something bold in order to fend off potential activists. As investors already know, Elliott Management is staying on the sidelines until September of this year, but if the stock continues its path, we believe activist investors will agitate the company to do something dramatic.
  • Reading the Tea Leaves: During the analyst day, [EMC] CEO Tucci was quoted saying the “industry is right for consolidation. And if we do those right and pick right we can also …do something that’s quite accretive quite quickly.” We quickly note that other than acquisitions, some of the options available to EMC include – (1) paying out a one-time dividend; (2) announcing an accelerated share buyback program (ASR) that is meaningful; (3) and In a prior note we analyzed spinning of the Emerging Storage Business (ESB) and as it stands we would expect it to be anywhere between $7-8 per share, in line with multiples given to other emerging storage business such as Nimbe Storage (NYSE: NMBL).
  • Priority On Security: With CIOs moving security to the top of the corporate spending priorities agenda, we believe EMC would look for accretive deals in this space. In this note, we specifically look at the security vertical, since the company has explicitly noted that it had underinvested in RSA for some time. We believe the most enticing candidate for EMC would be Symantec (Nasdaq: SYMC). SYMC qualifies as a meaningful acquisition candidate, despite being a legacy technology, because of (1) its highly accretive potential; (2) ability to vault EMC to the top of some of the most important security product spaces; and (3) the stock is cheap by any metric.

Other potential acquisition candidates include: Checkpoint Software, Palo Alto Networks (NYSE: PANW), FireEye (Nasdaq: FEYE), Fortinet (Nasdaq: FTNT, Imperva (Nasdaq: IMPV), Qualys (Nasdaq: QLYS).

For an analyst ratings summary and ratings history on EMC click here. For more ratings news on EMC click here.

EMC closed at $25.47 yesterday.

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