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Why Virtustream Is a Big Step for EMC in the Cloud Space

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Virtustream strengthens EMC’s hybrid cloud portfolio

As we have seen in the prior part of this series, EMC (EMC) doesn’t want to be left behind when it comes to all the buyout activity in the cloud space. Within the span of one year, Virtustream is EMC’s second acquisition in the cloud space. The company announced the acquisition on June 3, 2015. This acquisition complements the Cloudscaling acquisition that EMC made in September 2014. Cloudscaling was one of the first startups to distribute OpenStack open-source cloud software.

According to MSV Janakiram, founder and cloud computing consultant of Janakiram & Associates, “With Cloudscaling, EMC got an entry into the OpenStack private cloud market and with Virtustream, EMC will instantly gain access to the global footprint of data centers set up by Virtustream.”

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Virtustream could give EMC a push in the public cloud infrastructure market

Gartner, in its recent cloud IaaS report, applauded Virtustream for “winning large-scale enterprise deals, particularly those focused on SAP (SAP) and that require managed service capabilities.” As the presentation above shows, Gartner has named Virtustream a niche player in its May 2015 Cloud IaaS Magic Quadrant. Amazon Web Services (AMZN) and Microsoft (MSFT) continue to be leaders in the cloud IaaS space. Thus, with Virtustream in its portfolio, EMC could position itself as a strong player in the expanding public cloud infrastructure market.

Virtustream acquisition might ease the pressure EMC is facing from activist investors

As we have mentioned in EMC’s 1Q15 earnings series, the company has faced pressure in both the past and the present to move its federal structure away from Elliott Management, an activist investment firm. Elliott Management took a $1 billion stake worth ~2% in EMC in 2014, with the likely intention to urge EMC to spin off its 80% share in VMware (VMW). However, this pressure eased to some extent when the investment firm agreed to a “standstill agreement” until September 2015.

If you’re bullish on EMC’s stock, you could invest in the Technology Select Sector SPDR Fund (XLK). It invests about ~1.27% of its holdings in EMC.

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