Dell today announced that it signed a definitive agreement to acquire EMC Corporation for a total of $67 billion, making it the largest ever acquisition in the technology industry so far. Until now the largest acquisition was the $ 37 billion Avago paid for chipset maker Broadcom in May this year. The transaction is expected to close in the second or third quarter of Dell’s fiscal year ending February 3, 2017.
EMC offers data storage, information security, virtualization, analytics, cloud computing and other products. VMware, which is a subsidiary of EMC after it was acquired by EMC in December 2003, will remain an independent, publically-traded company allowing Dell to receive equity in order to finance the merger as suggested by Reuters. VMware stock went down around 10% showing both a low confidence in how Dell operates when it comes to VMware and a “technical” assessment due to the acquisition strategy that Dell will put in place (selling “tracking stock” to pay part of this acquisition).
Dell founded in 1984 by Michael Dell started as a company making its own computers, taking a successful approach by selling their systems directly to customers using custom assembly options for each unit. By the year 2000 Dell reaches $ 40 million per day from selling its hardware. Michael Dell steps down as CEO in 2004 to return in 2007 reinventing the company after Dell loses its lead in the PC market to Hewlett-Packard. From 2007 and forward Dell makes several acquisitions like Equallogic and Quest Software. In 2013 Michael Dell together with Silver Lake Partners, did a company buyout making Dell a private company again.
Of course this acquisition will have a major impact on both EMC, Dell, VMware and both partners and customers. It’s clear that Dell is in the transformation from a hardware company to a company selling both hardware and software and offering Cloud Services. This is mainly a strategic move since Dell original business (the hardware) is thinning. Looking at this acquisition we can also state that HP maybe missing the boat here, since it isn’t evolving in the same way as Dell is doing. Another company doing a lot with hardware, IBM already took distance from part of its hardware business by selling to Lenovo.
Dell already has a lot of storage products in its portfolio, and will most probably add the EMC offerings to its product line now being able to cover top tier storage solutions as well in addition to its existing products covering the middle tier. The product line of Dell before and even more after this acquisition is very diverse, because Dell also acquired Quest Software in October 2012 expanding its product line with much software solutions already. It will be interesting to follow on whether Dell will try to uniform all their technology to single products offering a full stack since its very confusing from a customer standpoint, in order for this to succeed many holes must be filled, take for example having an OS or middelware. Other options could be that Dell will sell some of their assets or remain a company with multiple solutions in multiple disciplines.
For now it’s unclear what will happen with VMware, if it keeps a direct relationship with Dell, VMware will have a hard time convincing other hardware vendors to keep selling its virtualization product in combination with their hardware. On the converged hardware infrastructure site, Dell has close connections with Nutanix the company at which VMware competes using its EVO:RAIL/EVO SDDC technology. Dell also has a close relationship with Microsoft, on which VMware competes on the Virtualization platform/Cloud computing solutions among others.