Iomega Ponders EMC & ExcelStor Deals

A week after its initial offer was rebuffed, EMC has given Iomega another pitch to consider -- one that has gotten better reception.

Iomega's management has agreed to consider a new offer from EMC that could bring the purchase price to about $205.5 million (or 54.8 million shares at $3.75 each), as opposed to the $178.1 million (54.8 million shares at $3.25) EMC originally proposed.

Iomega shares rose on the news and were trading this morning at $3.55, up .29 (8.9 percent).

As before, a commitment Iomega made last December to acquire China's ExcelStor could stand in the way. That offer includes the issue of 84 million shares of Iomega common stock (based on share price at closing) in exchange for all outstanding ExcelStor common shares.

Even though the ExcelStor deal conceivably could come in at a higher value than EMC's, given the terms outlined above, Iomega's official statement today calls EMC's bid a "superior" proposal. But specifics aren't laid out about elements other than share price value that caused the board to change direction regarding EMC. And the statement also indicates the board has no assurance either that EMC will actually produce a deal or that Iomega will accept it.Neither EMC nor Iomega have commented on whether Iomega is actually facing an "either/or" situation when it comes to picking a potential EMC deal over the existing ExcelStor one.

But according to information Iomega provided previously, it seems the company will have to carefully consider its moves. If it buys ExcelStor, which manufactures some of Iomega's hard disk drives, ExcelStor's Chinese parent, Great Wall Technology Company Ltd. (GWT), would own 43 percent of Iomega's common stock. In turn, about 62 percent of GWT is owned indirectly by state-owned China Electronics Corp., a $16 billion operation with interests in "computer and component manufacturing, integrated circuit design and manufacturing, software development and systems integration, telecommunications, consumer electronics design and manufacturing."

EMC has its own interest in consumer storage products, but ownership by EMC would bring a different future to Iomega, one focused not as heavily in China.

At least one analyst thinks Iomega should hedge its bets with EMC. "They should take the EMC deal. A combined EMC and Iomega could still do a partnership or side deal with ExcelStor," says Greg Schulz of the StorageIO Group. The analyst also thinks EMC should make every effort to buy Iomega at a reasonable price, since that company's established traction in the "prosumer" space would considerably boost EMC's consumer efforts.

Iomega's furnished no timeframe for a decision on any of the proposals.Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.