Report: HP Walks from EMC Merger Talks

After months of negotiation, Hewlett-Packard (HPQ) reportedly has permanently walked away from any further M&A discussions with EMC (EMC), according to a Reuters report.

Because the talks were private, it’s unclear when HP backed off and what influence its decision and subsequent announcement last week to split the company into a PC/printer business and an enterprise operation exerted on a possible deal. Top brass from both companies were said to still be attempting to put something together as recently as last week but price, reportedly the constant sticking point in the talks, scuttled the latest huddle as well.

There had been some speculation that HP’s split would open the door for a deal with EMC, a scenario in which the storage giant might acquire the new HP enterprise unit, but that chatter now appears to be dead as well.

Still in question is HP’s notation, in the separation’s aftermath, that it possesses material non-public information related to a possible acquisition.

Word first surfaced in late September that HP and EMC had talked sporadically for about a year about merger options and HP also had engaged Dell in similar discussions. The EMC HP confabs went so far as to figure out that EMC boss Joe Tucci would be chairman and HP chief Meg Whitman chief executive of the combined company, which together would sport a market value of some $130 billion.

Two weeks earlier, HP, to much denial, was mentioned as a possible VMware (VMW) suitor when word surfaced that EMC was considering offloading its 80 percent stake in the virtualization vendor. Activist investor Elliott Management, which took a 2 percent interest in EMC last July valued at about $1 billion, has been pressuring the storage giant to sell off VMware to improve its stagnant stock performance.

Close observers believe that HP’s true interest in getting a deal done always was VMware, whose market cap is north of $41 billion—more than HP seemingly could swallow for cash. Had the two behemoths been able to make the deal, VMware immediately would have provided HP with a formidable data center lineup, a combination of its server and networking technology extended by VMware’s virtualization software that could have given it a true soup-to-nuts offering for the enterprise data center.