FBR Capital analyst Daniel Ives weighed in today with a few insights on EMC Corporation (NYSE:EMC), after the company announced the acquisition of privately held Virtustream, a cloud software and infrastructure-as-a-service (IaaS) provider, for $1.2 billion. The analyst reiterated an Outperform rating on the stock, without providing a price target.
Ives wrote, “Strategically, we believe this is a very logical deal for EMC as it helps round out its hybrid cloud offerings and contributes to another cross-selling opportunity within the company’s federation of offerings. This broader hybrid cloud portfolio should enable EMC to expand its tentacles, and cloud revenue growth opportunities, outside its current enterprise hybrid cloud solutions and help customers to transition applications from on-premise to the cloud. Ultimately, while we like this move in the cloud, we believe the company will need more M&A to help find its next growth act as EMC’s core business remains very mature and may have inherent challenges ahead given the shift to the next-generation datacenter and the evolving role of storage capabilities/needs for enterprises going forward in a virtualized world.”
“Overall, in our opinion, although the deal for Virtustream makes strategic sense, it does not move the needle financially, and we continue to believe strategic changes (e.g., lingering VMware ownership situation) and a more aggressive M&A focus are necessary ingredients to help put EMC back on the path to more consistent growth.”, the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Daniel Ives has a total average return of 10.0% and a 70.6% success rate. Ives has a 3.2% average return when recommending EMC, and is ranked #338 out of 3608 analysts.