Investors expected a noisy fight over breaking up the EMC computer storage company when the hedge fund Elliott Management surfaced in July as the company’s big new shareholder.
What Elliott instead found was a technology stalwart already exploring its strategic options, including potential sales to some of its large rivals.
The revelation of EMC’s talks with the likes of Hewlett-Packard, Cisco and Oracle about a range of possible transactions — including some that could lead to an outright merger — highlight the continuing problem with aging technology giants pursuing growth and relevance.
The pressure recently has seemed especially acute on EMC, a leader in computer storage products that has found itself hobbled by the move away from traditional servers and into cloud services that host data on an array of far-flung systems. Elliott’s entrance helped spur questions about whether the company would take drastic steps like selling or spinning off its 80 percent stake in VMware, the hugely successful leader in virtualization software.
But questions about the huge shift have also dogged other longtime leaders like HP and Cisco, both of which have also sought to prove themselves capable of adapting to the new reality.
Across the technology industry, companies that make a significant amount of their revenue from sales of hardware devices are facing tough going. Spending on information technology has slowed significantly in recent years, crimping these businesses’ growth engines.
“For the tech sector as a whole, and particularly for larger companies, the challenge has principally been topline growth,” said A. M. Sacconaghi, an analyst at Sanford C. Bernstein. “We have had a challenging I.T. spending environment.”
That has raised the possibility of acquisitions to shore up promising operations. But even analysts were surprised by the potential blockbuster deals that could reshape the industry.
One such transaction could have been the union of EMC and HP, in what would have been billed a merger of equals that would create a nearly $130 billion technology titan. People briefed on the matter said that talks had been on and off for almost a year, but recently floundered on what one person said were difficult issues, including financial terms.
EMC has considered other deals as well, like a potential sale to Cisco, another of these people said. It is unclear when EMC will announce a deal — if it does at all — but this person said that a decision is likely to come sooner rather than later.
Representatives of the companies and Elliott declined to comment.
Shares in EMC rose slightly on Monday, to $29.68, while those in HP and Cisco each fell by less than 1 percent, after The Wall Street Journal reported the talks.
Some analysts said that a deal between EMC and HP would have made some sense, since it would have created a company with a broad array of technology offerings but with a strong focus on storage.
Under Meg Whitman, HP has stabilized, especially as it has come back from a number of ill-starred decisions like the disastrous acquisition of the corporate software provider Autonomy. But while HP has continued to publicly promote its commitment to enterprise solutions, it has yet to make great strides in moving away from more commoditized offerings like personal computers and printers.
“They’re playing second or third or fourth to another industry leader in most of their markets,” said Jayson Noland, an analyst at Robert W. Baird. “As an analyst, you’d rather have a company that’s really, really good at one or two things.”
Still, analysts like Mr. Noland and Mr. Sacconaghi said that a tie-up of EMC and HP would have had issues like overlapping product offerings, particularly in storage products.
Mr. Noland noted other megadeals in the tech industry that proved complex and posed serious problems for acquirers, including the merger of Alcatel and Lucent and HP’s takeovers of Autonomy and EDS.
A union with the networking giant Cisco, on the other hand, would be cleaner, according to Mr. Sacconaghi. Cisco has little in the way of storage business, and EMC’s products could fit more obviously in its offerings. Moreover, the two already have a four-year-old joint venture dedicated to integrating their technologies.
Such a tie-up has an added benefit, since their chief executives — Joseph M. Tucci for EMC and John T. Chambers at Cisco — have known each other for a long time, one of these people added.
Mr. Chambers has benefited from being in a stronger business position than either Mr. Tucci or Ms. Whitman, as networking continues to be a steadier business. Yet Cisco, too, has been anxious to declare itself in the cloud business, even as data centers delivered just 6 percent of its fiscal 2014 revenue. Mainstay routing and switching for networks contributed 46 percent.
But the spotlight has been on EMC in recent months, with Elliott’s emergence highlighting investor skepticism about the company’s fundamental business model as its stock has lagged those of competitors over the last three years. The company is built around what it calls a “federation” of operations: storage, the Pivotal software development unit and the RSA network security services provider.
“We believe that there are real synergies and real benefits, hard-dollar benefits, in having VMware, EMC and Pivotal and RSA in the same company,” David I. Goulden, the head of EMC’s information infrastructure unit, said at a recent conference.
Yet the biggest contributor to the company’s $60 billion market value is the 80 percent stake in VMware, whose software mimics other computer programs. The analyst community has long questioned whether EMC would ever be moved to part with the stake, to which Mr. Tucci has long responded with definitive statements like “Never.”
Mr. Tucci and other EMC executives have expressed a desire to try to keep together many of the businesses that the company has assembled over time, one of the people briefed on the matter said. But a big deal could do that almost as well as staying independent and pushing for smaller measures to bolster returns for investors.
“EMC has said, ‘We think we’re better together, but we’re trying to create value for shareholders,’ ” Mr. Sacconaghi said. “EMC may be entertaining other such options.”