How do you solve a problem like Elliott? EMC's got 3 weeks to figure it out

And at that point things will get mighty interesting

EMC has most of October to answer activist investor Elliott Management's demands for a shareholder value increase through a sell-off of VMware.

According to an Elliott leak Reuters report, Elliott, with two directors on EMC's board, hopes the extra time after the expiration of the September standstill agreement will enable EMC to come up with an acceptable response and so avoid a public contest for investor support of the kind, we take it, that led to the Imation proxy war and unseating of its board chairman and its CEO.

Elliott currently has its hooks into Citrix, which is looking for a buyer.

Although EMC CEOs and execs are publicly in favour of the Federation remaining intact, there is a strand of thought lower down the exec tree that sees little technology value in it.

For example, we have been told: "The Federation would be a great idea if there were effective technical collaboration as to how to add value when multiple pieces are combined. But there isn't. So there is no point to it other than financial engineering."

If Joe Tucci is the only brand of exec-level superglue capable of holding the Federation together then, when he goes, the Federation is liable to erupt into disruptive member competition as the component businesses struggle to follow directions that make sense to them, rather than be corralled by Federation discipline.

In particular, some would say, VMware would compete strongly with EMC II in storage, and inside EMC II there needs to be better product technology planning and co-ordination as well.

Elliott is said to be biding its time until EMC's Q3 earnings statement is issued on October 21.

Macquarie analyst Rajesh Ghai thinks EMC should re-explore a merger/acquisition deal with HP as the best way of unlocking shareholder value, meaning giving shareholders either a pay-off or a big share price increase. Any EMC stock buy-back program would have to be huge to match the effect of such a merger. ®

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