If you follow EMC investment news, you’ve seen the headlines.

The Wall Street Journal ran with “Activist Investor Pushes EMC to Break Up”. Bloomberg news headlinedwith “EMC Said to Be Targeted for Breakup by Activist Elliott.” Business Insider went with “An Activist Investor Takes Aim At A Multi-Billion Dollar Tech Company.”

We could go on, but the point is already well made. Elliott Management, an activist hedge fund which generates a 14.6 percent net compound annual return for its investors, compared to 10.9 percent for the S&P 500, has loaded up on EMC shares and wants to split the “EMC Federation” (made up of EMC,VMWare and Pivotal) up into parts.

One Possible Future

The argument? EMC’s strategy isn’t working. Elliott claims EMC is dragging down VMWare’s performance.

While most of the news coverage has concerned itself with the fact that Elliott believes VMWare would generate greater returns independent of EMC, there’s something else to consider: What happens to EMC and the “groups” or operating units that it owns if VMWare succeeds?

According to Yahoo Finance, Elliott will seek buyers for the whole or parts of EMC after the separation of VMware, adding that interested buyers could include Oracle Corp., Cisco Systems Inc. and Hewlett-Packard.

Needless to say, one of those “parts” would likely include EMC IIG, which owns Documentum and Syncplicity.

Over the years, we’ve heard both investment advisors and industry analysts, such as 451 Group Research analyst Alan Pelz-Sharpe, question whether EMC and IIG (minus Syncplicity) belong together at all. “It's time for EMC to divorce itself of IIG,” said the six-page paper Pelz-Sharpe authored.

And while EMC IIG President Rick Devenuti made a good case for why IIG and EMC (and even Pivotal) share mutually beneficial relationships, it might be harder to establish that with a broken up EMC. Not only that, but the seedling of how IIG’s rising star InfoArchive will feed Pivotal’s third platform might also be gone if the connection made via the Federation was lost.

Proxy Fight

Now we should say that EMC Chairman and CEO, Joe Tucci, is “adamant” about keeping the federation intact, but Elliott isn’t a foe that backs off easily. In fact it often succeeds.

In 2012, the hedge fund’s pressures influenced Hess Corp. to divest all of its downstream operations, including its retail stores. The fight cost CEO John Hess his role as chairman of the board but has generally been good for share prices. Hess is now transforming itself to a pure-play exploration and production company, with a focus on increasing shareholder value.

It’s worth noting that EMC’s shares have risen of late, possibly because of its strong sales figures in Q2. But it’s worth considering whether Elliott Management’s moves haven’t had an impact as well.

What does this mean if you work with or use Documentum? That change could be coming. If Oracle, HP or Cisco were the acquirers, IIG’s direction could very well change. If it were spun off, anything could happen.

(Neither CMSWire nor the author is offering any investment advice.)