The biggest ever USA tech deal has been compared to a minnow swallowing a shark, but Dell’s stunning acquisition of leading corporate storage provider EMC has made the minnow one of the top three firms in the enterprise technology industry.
Advertisement
The acquisition will enable Dell to secure a place in the $2 trillion information technology market as the world’s largest privately-controlled, integrated technology company.
Michael Dell will lead the combined company as chairman and chief executive officer.
Michael Dell along with EMC so Joe Tucci will take to the phones later today to give analysts more meat on the bones but already the rationale for the deal has been outlined to investors.
The Byzantine deal involves issuing of a VMware tracking stock that lets Dell retain EMC’s control of VMware – which a few consider the most attractive part of EMC – with minimal capital outlays, analysts say. There are no immediate plans for layoffs related to the deal and the combined company will have three technology hubs in Austin, Texas, Silicon Valley and in Massachusetts, the company says.
The company also comments, “The combination of Dell and EMC creates an enterprise solutions powerhouse”, in a prepared statement. EMC, based in Hopkinton, Massachusetts, makes data storage equipment and provides other IT services to companies. VMware will remain an independent, listed company.
Dell and EMC share an auditor – PwC.
Since going private in a $25 billion deal completed in 2013, Dell Inc. has been investing in research and development and expanding its software and services business as those in the technology industry continue to struggle with soft PC sales. One good sign for EMC management was the immediate approval of the Dell deal by Elliott Management Corp., the hedge fund manager that had been pressing EMC to break itself up for about a year.
The deal is expected to close a few time between May and October 2016.
Dell is buying EMC to establish its presence in the growing cloud market.
Advertisement
And in addition to tiny extremely-promising startups, Dell is also putting itself directly in competition with Amazon’s huge move into cloud computing and big data products. This will entitle EMC shareholders to have only economic interest in the trading stock but not own them (that is no voting rights or dividends).
