Anything Below $30/Share Likely Rejected by EMC (EMC) Shareholders - Summit Research
Summit Research is out with commentary on speculation that Dell might move to acquire EMC (NYSE: EMC).
Analyst Srini Nandury noted that any deal below $30 per share would likely be voted down by shareholders. The analyst broke down the following:
- Legacy Storage Business is worth $8.25 per share:
The legacy storage business consists of Mid-range VNX, VNXe, Data Domain, VMAX, Data Protection software such as Legato, Avamar etc. EMC is the market leader in both NAS and SAN segments of the market and has a huge install base of fairly sticky customer base. Based upon our Sum of the Parts analysis of EMC, we believe the legacy storage business is worth atleast $8.25 per share, if given a multiple of 1.3x on a EV/sales basis. We believe this multiple is reasonable given that NTAP is currently trading at 1.0x multiple.
- Emerging Storage Business is worth at least $6 per share:
The emerging storage business consists of XtremIO, VIPR, ScaleIO, Atmos, Isilon, and DSSD accounts for about 20% of revenue. XtremIO by itself reported bookings north of $1billion and is growing rapidly. We expect the emerging storage business to grow at least 35% Y/Y for next two years. If we give the emerging storage business a multiple of 4.0x, which is in line with Nimble Storage (NYSEL NMBL)(BUY), and still a discount to Pure Storage (NYSE: PSTG), Emerging storage business is worth at least $6.00 per share.
- VMWare (NYSE: VMW) is worth $13 per share:
In our opinion, VMware (VMW, BUY) is the crown jewel of the EMC federation. VMware has several valuable, fast-growing assets such as NSX, AirWatch and VDI. EUC (End User Computing) consisting of Airwatch and VDI, continue to grow rapidly, with the company reporting booking north of 30% in the most recent quarter. NSX, in our view, is the most disruptive of all technologies within VMware. NSX already has 700 paying customers and is the thing to watch. If VMware is given a multiple of 5.0x, which is reasonable for a high growth strategic asset, we believe VMware by itself is worth atleast $13.00 a share.
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