Dell acquiring EMC for $67 billion to boost cloud proposition

By Business Cloud News

As extensively leaked PC and server outfit Dell announced it will be acquiring storage giant EMC for $67 billion to create a leading player in the datacentre and cloud industries, reports BCN.

Dell is privately held by founder Michael Dell and VCs MSD Partners and Silver Lake. The combined company will remain private, while VMWare, which is majority owned by EMC will remain separate and publicly traded. This deal is the biggest tech M&A deal of all time and the resulting company will be one of the world’s largest privately held ones. Dell only cost $25 billion to take private, so it’s asking for a big contribution from its equity partners.

As with any massive M&A scale and efficiencies will be major strategic benefits, but the two companies were also keen to stress how much they complement each other, with Dell strongest in the SMB and public sector markets while EMC’s strongest area is blue-chip corporates. In terms of product portfolio the narrative inevitably refers frequently to end-to-end solutions and that sort of thing.

“The combination of Dell and EMC creates an enterprise solutions powerhouse bringing our customers industry leading innovation across their entire technology environment,” said Michael Dell. “Our new company will be exceptionally well-positioned for growth in the most strategic areas of next generation IT including digital transformation, software-defined data center, converged infrastructure, hybrid cloud, mobile and security.

“Our investments in R&D and innovation along with our privately-controlled structure will give us unmatched scale, strength and flexibility, deepening our relationships with customers of all sizes. I am incredibly excited to partner with the EMC, VMware, Pivotal, VCE, RSA and Virtustream teams and am personally committed to the success of our new company, our customers and partners.”

“I’m tremendously proud of everything we’ve built at EMC – from humble beginnings as a Boston-based startup to a global, world-class technology company with an unyielding dedication to our customers,” said Joe Tucci, CEO of EMC. “But the waves of change we now see in our industry are unprecedented and, to navigate this change, we must create a new company for a new era. I truly believe that the combination of EMC and Dell will prove to be a winning combination for our customers, employees, partners and shareholders.”

It’s not difficult to spot the customary synergies in this deal. When Dell went private it was primarily to allow a complete strategic overhaul away from the voracious quarterly demands of Wall Street. Fundamentally it wanted to move out of the highly commoditised PC market on which it was founded in the 80s, and into core enterprise IT sectors such as servers.

EMC has been in the enterprise data storage game for even longer, is been threatened by pure play cloud providers and needs to move with the times. Just as with Dell, EMC seems to be betting that removing the rabid short-termism that comes with being a public company will allow it the space to do that and, assuming MSD and Silver Lake remain patient the new company should be able to innovate and compete well in the cloud, virtualization and IoT worlds.

“We are excited and honoured to invest in the outstanding businesses built by Joe Tucci and his world-class management team,” said Egon Durban, managing partner of Silver Lake. “We believe the strategic integration of EMC and Dell will generate unparalleled depth and breadth across servers, storage, virtualization and the next era of converged infrastructure, creating a global technology platform poised for sustained long term growth and innovation in the years to come. We are doubling down and increasing our investment in this differentiated market leader for the next paradigm of enterprise computing.”

The plan is for Michael Dell to run the whole company and Tucci to move on when the deal is done. A deal this size will take a while to get approval and complete, so nothing concrete will happen for a few months yet. But when it does, the cloud market will hopefully be more competitive than ever.