This is hypothetical.
If CSCO were to buy EMC, it would get about 80% of VMW.
If CSCO paid 30 ( using a round number), what would that value VMW at?
Unless they made a tender for the rest of VMW it would still trade freely.
Another question would be I would assume that if CSCO bought EMC for 30 it might buy the rest of VMW. What price would that be?
I know this is all hypothetical.
Serious replies only.
Disclaimer- I am long both EMC and VMW!
As of today's close, EMC's stake in VMW is worth 13.96. The EMC stub is worth 6.75. IF CSCO acquired EMC, if no other actions were taken, it would not necessarily affect the VMW valuation. At 6.75, EMC trades for about 3.5x EBITDA. At 8x, the stub would be valued at about 14, based on forecast 2010 EBITDA of $3.1 billion.
The answer is very simple,
CSCO already ownes 6% of vmw when it went public back in 2007. So does Intel owns 3 to 6% from what i recall.
Rest of the VMW is wholy owned by EMC so if CSCO bought EMC, VMW comes with it since emc has the ownership.
totaol of 400mil shares, 78mil shares or so are a float, lot of which is owned by insiders and VMW staff. 300mil is with emc.
So 30dollar a share for EMC is a bargin. considering maket cap for VMW alone is 35bil alone.. so emc will only cost them 18dollar a share.
EMC has substantial cash so does VMW, which amounts to close to 10bil..
You do the math, this really is a bargin. I personnaly think EMC is worth about 34 to 36 dollar a share.
CSCO is stupid, if they dont go for it. This will put them in driving seat to start competeing with IBM HP ORCL and many other companies..