[howdydudey]

I am a noob, so I was wondering if any more experienced posters could clear this up for me.

EMC Corp (EMC) is an IT company
Market Cap: $43.02 bln.
Revenue: 11.1 bln
Income 1.2 bln.
Net tangible assets: 3.3 bln.
P/E: 33

VMWare(VMW) is a virtualization software company. Recent IPO
Market Cap: $32.10 bln.
Revenue: 700 mln
Income 70 mln.
Net tangible assets: -830 mln.
P/E: 222

EMC owns 87% of VMW so its stake is worth 28.5 bln.

I would say there is a pricing disconnect between the companies.

Bear Stearns and Citigroup upgraded the stock this morning. Citi basically stated that it EMC will go up because it is undervalued when compared to its large ownership of VMW.

I think it is the opposite. I think EMC’s low price indicates that VMW is overpriced.

There is an example in Intelligent Investor that is strikingly similar to this, with the end result of the overvalued spinning off crashing in value.

So would this have been an arbitrage opportunity if it was caught sooner?

Anyone that has more experience have any thoughts?

Also, considering the stock has a 32 bln market share, can a 200+ P/E ever be justifiable?