EMC Keeps Growing Its Stranglehold Over VMware & Virtualization (EMC, VMW)

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EMC Corp. (NYSE: EMC) has one major value in its holdings of VMware Inc. (NYSE: VMW).  It is worth billions upon billions in raw dollars due to VMware’s status as the de factor King of Virtualization.  What is amazing is that, contrary to the belief of many investors when VMware came public, EMC continues to acquire VMware shares rather than divesting its position.  It has more than 80% of the control in the company and a fresh filing shows the following purchases with the price at the (volume weighted average price) VWAP:

  • 06/04/2012 it bought 56,500 shares at $88.3524 VWAP
  • 06/05/2012 it bought 55,400 shares at $90.167 VWAP
  • 06/06/2012 it bought 31,900 shares at $93.7377 VWAP

EMC now holds some 38,588,726 shares of Class A VMware common stock, but its annual report notes, “EMC holds approximately 80% of our outstanding common stock … including 38 million shares of our Class A common stock and all of our Class B common stock, and we are considered a ‘controlled company’ under the rules of the New York Stock Exchange.”

VMware was already called the de facto King of Virtualization, but in effect it is just a tracking stock structure from the late 1990s and early 2000s.  This is quite simply one of the 11 Stocks Where Shareholders Have No Power – At All.

This is one of those situations where investors have to hope that all goes well with EMC and VMware.  So far it has gone well for the shareholders.  The company fired then-CEO Diane Green in 2008 and EMC could effectively do whatever it wants to with this company due to the voting rights.

EMC’s stranglehold over VMware is only getting tighter and tighter.

JON C. OGG