They don’t come much bigger than this. Dell’s deal for EMC weighs in at a whopping $67bn, making it the largest IT transaction of all time.
The purchase, if it goes through, will turn Dell into an IT giant with fingers in almost all enterprise technology pies, making it a rival to the likes of IBM, Cisco and HP.
Dell founder Michael Dell said that the acquisition will turn his company into an “an enterprise solutions powerhouse” to help firms with all their technology requirements, covering cloud, mobile, security, storage, servers and virtualisation.
“The company will be a leader in the extremely attractive high-growth areas of the $2tn IT market,” said Dell, while speaking on a call to discuss the deal.
Dell also said that EMC’s strength in the large enterprise market is an ideal fit with Dell’s historic strength in the small and medium sized business markets.
“Our new company will be exceptionally well positioned for growth in the most strategic areas of next-generation IT," he added.
Quocirca analyst Clive Longbottom agreed that there is a lot for Dell to gain, ranging from EMC’s customer base to its patented technology.
“Dell gets access to EMC’s hardware portfolio, which will heavily overlap with Dell’s existing storage, [and] it does gain a strong customer base and channel,” he told V3.
“It also gains a patent portfolio and some cutting-edge thinking around cloud and software-defined approaches.”
Forrester research director Glenn O'Donnell noted that the acquisition will help the company play in on-premise and cloud environments.
“Cloud is growing fast, but in-house technology will remain important for a long time. These two must work as one seamless environment,” he said.
“For most companies, this is not yet the case. Dell can make some good progress in this direction with EMC in the fold.”
Dell himself was also upbeat the deal, saying that EMC will enable the company to perform even more strongly in the cloud market.
“I think the combined companies are very well positioned to address the move to the cloud," he said.
"Dell has been providing infrastructure to public, private and hybrid clouds for a long time and has done well there, and VMware is well positioned for hybrid cloud too ... so we’re even more prepared for that.”
The cloud market is estimated to be worth $32bn in 2015, and will only grow, and this will undoubtedly be key to Dell's future success.
A question of timing
One interesting aspect of Dell’s decision is that it comes at a time when other tech giants, most notably HP but also Symantec and eBay, are getting smaller as they split themselves up.
Dell is clearly looking to do things differently, and is probably able to do this thanks to its decision to go private, taking it away from the glare of shareholders and into a position where mega-deals like this are acceptable.
However, Longbottom questioned the timing, given that Dell has just about come through its complex move to go private.
“I don’t particularly like the timing of this. Just as a new Dell was emerging from the clouds of going private and being reinvented, it takes on such a massive challenge that it will be some time before it can present a solid front to its customers,” he said.
Indeed, it's unlikely that the deal will be closed until, at the very earliest, the middle of 2016, and there is a lot of work to do for Dell to close the deal and incorporate EMC into the fold.
However, EMC chief executive Joe Tucci said on the call that the current division heads within EMC - such as Pat Gelsinger, CEO of VMware, and David Goulden, CEO of EMC Information Infrastructure, will remain onboard.
This should help the business to remain stable during the transition and the day-to-day running.
Longbottom acknowledged that Dell's move is a "gamble" that could pay off as other IT companies, such as HP and IBM, are going through their own transitions and might play into Dell's hands.
“With IBM reinventing itself as a Power-driven cloud company, and HP still trying to sort out its two new bits, Dell could be taking a calculated gamble that it may as well go for it while there is little true competition in the market,” he said.
O'Donnell also agreed that Dell now poses a more significant threat to other leading IT firms.
“A combined Dell-EMC would be a serious threat to HP. Dell is fairly weak on storage, and EMC will help give it a full portfolio that it needs to compete with HP, Cisco, IBM and the growing threat from Huawei,” he said.
Of course, there’s no guarantee that the deal will make it to completion, especially given its size, but the jovial nature of Dell and Tucci on the call to discuss the purchase suggests that it will go through.
Nonetheless, EMC retains the right to solicit bids from other companies until the purchase is done, so if there’s anyone out there willing to spend $67bn or more on a broad array of enterprise-focused IT services, now’s the time.
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