It has been no secret that EMC has been under some pressure from Elliott Management Corp., one of EMC’s investors, to do something to raise share prices. Rumors and speculation about what might be coming has been a topic of many different posts and articles over the last year or so, but now it has been confirmed that the deal is done. This deal will close in 2016, and EMC Chief Executive Officer Joe Tucci will finally get his opportunity to retire. For all practical purposes, this has been in the making for quite a while. There had been some speculation that some kind of announcement needed to occur by the earnings report.
I must be honest: in all my speculation about EMC’s future, Dell wasn’t a company that I had given too much thought to as a prospective buyer. I personally had my money on HP as the potential buyer. As it turns out, HP had also been in discussion with EMC, but HP has chosen to split the company in two, which officially takes effect on November 1, when the new HP Enterprise will ring the bell at the New York Stock Exchange. However, internally to HP, the split happened on August 1. I was a big fan of the virtual underdog scenario, quietly rooting for VMware to somehow manage to acquire EMC. Would that not be the ultimate irony were VMware to buy EMC, the company that originally purchased VMware?
That brings us to the question of what Dell will do with VMware. I am secretly hoping for Dell to spin off VMware. I would like to see VMware completely independent, and to see if this helps VMware’s continued IT drive and calls for more innovation, which was talked about during one of the keynotes at VMworld 2015. In my humble opinion, EMC is struggling to adapt and grow in the twenty-first century data center. EMC has lost its innovation, and with the venture capitalists involved, could that be at least part of the reason EMC seems to have no real direction, but rather just remains on the current course? If EMC was struggling to find a new CEO, how is it going to find a path to blaze? For that reason, maybe this acquisition for EMC will be just the thing to bring back a direction and the innovation that comes with it. Either way, the current-day EMC is over, and a new Dell juggernaut is released. I understand that EMC helps fill some shortcomings Dell was having in the enterprise storage market, and that this deal helps cement an end-to-end enterprise solution, but where will VMware fit in this puzzle? I believe Dell is looking to define the next generation of storage as well as data center landscape moving forward, and now we are witnessing Dell’s final transformation from a computer business to more of a corporate enterprise business.
So how does Dell finance this deal? That is a really good question, in that Dell already has $12 billion in debt from when it took itself private. That is one of the main reasons I think VMware has a very good shot at being spun off. This in turn could help Dell to finance the biggest technology deal to date.
What about EMC’s stake in VCE (VMware, Cisco, and EMC)? How is this deal going to affect VCE? Perhaps moving forward, VCE could be known as “VCD” (VMware, Cisco, and Dell). What other overlaps will there be in the new, combined portfolio of Dell and EMC? There are still many more questions than answers so far with regard to the announcements on this deal.
No matter what, this deal is going to change the dynamics in the data center landscape in what is a direct challenge to Dell’s closest competitor, HP. It will be interesting to see where things go from here. This is a big risk for Dell, a really big risk that could make or break the company. But hey, when there is no risk, there is no reward. Michael Dell, it would seem, has gone all in, and you have to give him credit as well as the entrepreneurial spirit award for starting out building computers in his garage and turning that company into the third-largest technology company out there