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What’s Gotten Into EMC?

EMC Corp. (EMC) is dramatically higher by 5.22%, or $.87, to $17.55. On top of yesterday’s gains, that’s a 9.5% run over two days. One explanation could be that the EMC-VMware trade is back. There is a surge in shares of VMware Inc. (VMW) which are up 7.1% to $71.11 this afternoon and have been on a 21.7% tear since Apr. 22 when the virtualization company reported first quarter revenue of $438 million that beat the consensus estimate and reaffirmed its full year outlook of 50% growth on $1.99 billion in revenue. EMC owns an 86% stake in VMware. But given the volume in EMC yesterday of 57.1 million shares, and 42.5 million shares so far during the current session (note that average volume is typically only 31.7 million), and call option volume that is roaring with heavy buying in out of the money June and July calls, there has to be something more to the move. There has been mild speculation that EMC will spin off some of its VMware stake, but that remains to be seen especially after CEO Joe Tucci was pretty adamant about not having any such plans during the latest conference call and it probably doesn’t make sense anyways with VMware valuation discounted as the stock has fallen well off its highs, and it’s even less likely that the upswing has to do with next week’s EMC World Conference. It could be just coincidental, but following Hewlett-Packard’s Tuesday takeover of Electronic Data Systems for $13.9 billion, trading has been extremely active. Something has gotten into EMC, but what that is still has yet to be determined.

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