Activist investor Elliott Management could be losing what’s left of its patience when it comes to EMC. It’s not happy with the storage giant’s performance and wants it to loosen its grip on VMware, of which it owns 80 percent.

Elliott believes VMware would generate better returns for investors if it were an independent company.

Not Perfect Together

Elliott, run by billionaire Paul Singer, owns more than $1 billion or about 2 percent of EMC’s stock. In October 2014, Elliott was EMC’s fifth largest shareholder and was vocal in demanding the breakup of the EMC Federation, which consists of EMC II (which owns EMC ECD aka Documentum), RSA, Pivotal ,and VMware.

In a letter to EMC’s Board of Directors last October, Elliott argued that the federation structure “obscures enormous value at EMC.” It advised EMC to pursue pathways to recognize this value, including a separation of VMware from Core EMC and/or various merger and acquisition opportunities

Time’s Up?

Elliott offered two potential courses of action:

  • Spin-off of VMware from EMC
  • Explore M&A opportunities for EMC

In January EMC and Elliott reached a temporary truce, which allowed Elliott to add two directors to EMC’s Board and gave EMC and VMware time to improve their performance. That truce expired today. According to most analysts, including those CMSWire interviewed last August, VMware’s stock price remains weighed down.

Reuters reported today that Elliott has given EMC until the end of the month to comply with its demands.

Options That Could Avoid a Break Up

Just before VMworld, VMware’s user conference in September, there were reports that VMWare might acquire EMC. Analysts such as Rajesh Ghai, a senior technology analyst at Macquarie Group, told CMSWire that such a move by VMware could prove to be “catastrophic” for VMware investors.

VMware CEO Pat Gelsinger told analysts who attended VMworld that VMware had no interest in acquiring EMC.

What’s Next?

EMC and VMware both report their earnings later this month, so it’s always possible that Elliott will like what it sees.

In the meantime, EMC II president David Goulden is out on the stump evangelizing about why the Federation’s strategy makes sense. ““We believe strongly that breaking up is the wrong thing to do,” he told re/code.

Every analyst we spoke to in August told us that it’s time for EMC Chairman and CEO Joe Tucci to step down. He’s working without a contract and is apparently searching for a successor anyways.

At one point it was believed that Gelsinger, Goulden or former Pivotal CEO Paul Maritz would get the job. A former EMC and VMware executive with whom we spoke to in confidence today doesn’t think that that will, or should, happen.

“Gelsinger wasn’t liked at EMC, so that would be a problem,” he said. And when it comes to Goulden, “He’ a sales guy and EMC typically has a geek in the president’s seat.”

In other words, neither seems right for the job, That could be why Tucci isn’t leaving the CEO’s seat, but even if that’s the case, he best watch his back. Elliott ousted much loved, long term Citrix CEO Mark Templeton last July.