By the Numbers: Could Cisco Buy VMware?

Cisco Systems (NASDAQ: CSCO) has long been rumored to be interested in acquiring EMC (NYSE: EMC). Now the networking giant may have narrowed its interest, according to reports.

Reuters reported late last week that Cisco’s pursuit of VMware (NYSE: VMW), which is 84 percent owned by EMC, culminated in informal talks last summer to purchase EMC.

Data storage giant EMC has a market cap of about $24 billion, while its server virtualization subsidiary VMware has a market value of just under $10 billion.

But with $29 billion in cash and securities, a large acquisition isn’t out of the question for Cisco, particularly with stock market values suppressed by the worst economic downturn in decades. And Cisco tapped the debt markets last week to the tune of $4 billion, which added to the speculation, although Reuters said Cisco was just taking advantage of low interest rates.

Analyst Kaushik Roy of Pacific Growth Equities said Cisco might be interested in acquiring VMware — but don’t expect EMC to be interested in selling.

“Is Cisco interested in VMware?” Roy asked. “Possibly yes. But will EMC sell it at this time and at these prices? Absolutely not.

“Is something imminent? Absolutely not,” he added, noting that EMC vice chairman Bill Teuber and storage division president Dave Donatelli recently sold shares. “If something is imminent, they wouldn’t have sold their EMC stocks now,” he said.

Roy said speculation that Cisco could buy all of EMC and split the company up would be “a financial engineering job of bankers, not of Cisco corporate development.”

Still, with around $30 billion to spend — which is more than even Microsoft’s (NASDAQ: MSFT) $20 billion cash hoard — Cisco could easily create some mischief.

But Roy pointed out that $26 billion of Cisco’s cash is overseas, and “cannot be brought back to the U.S. without a huge tax penalty.” Of course, Cisco could still issue shares to buy another company, he noted.

This story originally appeared on Enterprise Storage Forum.