Yesterday, after many worries—some regulatory (Would the EU sanction the deal? Would China sanction the deal?), some legal (Were the financial instruments being used to finance the deal unlawful under the US tax code?)—the biggest IT merger ever in terms of monetary value finally occurred. This is one of those landmark occasions. Two of the biggest names in our industry, Dell and EMC2, have merged to become Dell Technologies.
What interests me now in this deal, apart from the obligatory “Who is going to run what department? What is going to happen to what product? I’m looking at you, EqualLogic and Compellent,” is the execution plan. Make no bones about it: this merger will live and die on the ability of the new senior executive team to blend, meld, and lead with a vision that makes the post-merger behemoth a viable company.
One thing that has been telling is the composition of that team. Obviously, Michael Dell is the head honcho. He has taken the roles of board chair and CEO of the combined monster Dell Technologies. Another Dell member, Tom Sweet, retains his position as CFO—interestingly, just of Dell, not Dell Technologies. The remaining senior leadership team members are all EMC staffers. David Goulden becomes president of Dell EMC Infrastructure Solution: effectively the same position he held at EMC. Howard Elias becomes president of Dell EMC Services and IT. Most interesting is that Jeremy Burton, the former EMC CMO, is becoming CMO of Dell, and Stella Low is becoming SVP of Global Communications Dell. This, to us at TVP Strategy, signifies that Michael realizes that the traditional Dell was not seen as a true enterprise player. Both Jeremy and Stella have excellent chops, having successfully navigated the enterprise-level brainset and developed pointed and arguably very successful messaging strategies—and by enterprise level, we mean the top fifty to one hundred companies in each country.
One other thing we take away from this is that it is a merger and not a takeover. Michael Dell now has the equipment to truly attack the enterprise market, both in terms of hardware and software and as a business leader with an understanding of the space. Traditionally, Dell has never been able to truly break into this space. It has never really shed being viewed as a consumer/SME market company. Historically, its purchases have been low- to medium-level acquisitions: think Compellent and EqualLogic.
It will be interesting to see how those divisions play out during the chaos that is a merger. Also of interest will be their partnerships, primarily the Dell/Nutanix OEM deal. Nutanix has signed up Lenovo and developed a version that can run on UCS. Personally, I think this makes a lot of sense for it, considering the bad blood between it and VMware.
Dell has already offloaded its Perot Systems division to NTT DATA of Japan. What other divisions of the merged company could be spun out? Perhaps Virtustream could be spun out, as its business crosses the areas of both Pivotal and VMware.
We know what has happened with VCE, the converged platforms division. It has remained under the guidance of Chad Sakac, and Dell has stated that it will retain its relationship with Cisco. This is good for current customers, but I do expect a slow refocus on NSX with Dell as the compute, rather than on Cisco ACI and UCS.
Most people are concentrating on the Dell EMC side of the business. I am more interested in the peripherals: VMware, RSA, Pivotal, Compellent, EqualLogic, and Dell’s networking division. What is going to happen with those? Is it going to be business as usual, or is the ax going to swing here, and over there a refocus?
There is still, however, one area in which Dell is lacking, and that is in networking. Yes, it does have a network division, which it enhanced with the acquisition of high-end manufacturer Force 10 in 2011. That offers a decent range of products, but truthfully, it has little to no traction in the market. Its midrange 1/10Gbe switches and routers are nothing to write home about. There may be an opening for an acquisition here to round out that gap. Perhaps with Arista? Its relationship with VMware and NSX would make this an interesting proposition. Another potential could be Palo Alto Networks, but most likely their product set is too narrowly focused.
The biggest issue with an article like this is that on day one, there is really little of substance to see other than the reams of LinkedIn profile changes flooding one’s inbox. As the dust settles, we will get a clearer picture. The company will have a plan, and it will be a massive one, and most likely highly detailed; this has been in the offing for almost a year. I, for one, would not like the see the MS Project Gantt chart for it. But like all plans, it is the execution of it that counts. We at TVP Strategy hope that this is a successfully executed plan, not least because of the many people we personally know and respect at the former EMC Federation, but also because of the new friends we will gain from the company formerly known as Dell.
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