Does EMC want to be bought by VMware?

Downstream merger being considered.

EMC is looking at a buyout from its own subsidiary VMware to try and stave off the pressure from shareholders demanding that changes be made to how the firm is run.

First reported by Re/code, VMware, which is 80% owned by EMC, would buy the parent company in a downstream merger that is just one of a plethora of options that the embattled board of EMC is considering.

Activist fund Elliott Management, which is led by Paul Singer, is reportedly throwing its weight behind the downstream merger and it would see VMware issue new shares in exchange for EMC shares combined with cash from the issuance of new debt.

It's thought the takeover would save a considerable amount on operating costs and makes better financial sense in general due to the fact that VMware shares trade at a much higher valuation than EMC's do.

Save, save, save!

There is considerable talk that shareholders want current CEO Joe Tucci to leave the company in a good position before he steps down and this has manifested itself in failed attempts to sell the firm to HP and Cisco. That in mind, it remains to be seen whether this is purely another failed attempt, although given that the majority of VMware's board is made up of EMC board members, it would be unlikely to fail if there's widespread support.

Any savings made would form part of the $850 million (around £548 million, or AU$1157) EMC pledged to cut by the end of 2017 and the sources that spoke to Re/code did explain that there is no indication that a deal between the two sides is at all close.