Dell snaps up EMC in $67B US mega-deal

Michael DellThe rumours became reality early Thanksgiving Monday, as confirmed that it had reached an agreement to snap up storage giant , and with it much of the of companies.

On a Monday conference call, said the $67 billion (U.S.) pact would create “the industry leader in extremely attractive high-growth areas of IT,” including leadership in storage, servers, virtualization and PCs. Dell cited his company’s strength in the midmarket, combined with EMC’s enterprise strength, as a way to forge an end-to-end IT powerhouse, continuing Dell’s journey away from its traditional identity as PC maker and towards integrated IT solutions.

“This combination makes great sense because of the obvious ways our businesses complement  each other and allow us to grow,” Dell said.

EMC CEO Joe Tucci

EMC CEO

EMC CEO Joe Tucci said the deal, which will see Dell team with its go-private deal investment partner Silver Lake to purchase EMC, makes sense because of the point the technology industry is at.

“The older style of IT is being quickly disrupted, but it’s rich with opportunities, moreso than ever before,” Tucci said. “When we look at what a company has to go through to handle the disruptive state of IT, having the mothership private has a tremendous long-term advantage.”

Specifically, Tucci said being free of a quarterly report card from investors would make the combined company more free to focus on customers’ needs and attract the best talent.

Dell echoed that, saying that taking his company private “gave us tremendous flexibility and agility,” leading to 11 quarters in a row of growing share.

“The company is doing well, and this takes it to a new level,” Dell said, adding in response to an an analyst question that “there’s a role for the public markets, but we’re enjoying life as a private enterprise, thank you very much.”

Tucci added that as “we come out of the era of silos in the ” that most companies are either going to go with cloud or converged infrastructure in their , and that he likes where the combined company sits in regards to those two markets.

“We’ll bring a much more effective offering to those customers at a time when even the big guys don’t want to integrate everything themselves,” Tucci said.

Under the terms of the deal, will remain separate and remain a publicly-traded company, but the rest of the Federation of companies under the EMC banner, including , , , and Virtustream, go with the core EMC II storage business into Dell’s hands. Dell said he had spent much time studying the Federation model prior to agreeing to the deal, and that the combined company “looks forward to enhancing” the Federation. However, Dell did seem to suggest that parts may be sold off or taken public, as the company is reportedly eyeing for its cybersecurity business.

“Within Dell, we have some fantastic new businesses we’ve been incubating ourselves, Secureworks for one, and Boomi for another,” Dell said. “I think there are some great aspects to this [Federation] structure, and as we come together as a combined company, it will be even more powerful.

, vice president of converged infrastructure at Calgary-based , called the deal a sign of the times, and further evidence of market consolidation in the IT space.

“Both were looking to fill a gap in their market presence, and this makes a strong market message, having all they do in one portfolio,” MacDonald said.

Long View is a longtime EMC partner, and has been working with Dell “at a more minor level” for some time, and MacDonald said EMC being sold is hardly a surprise after it’s much-publicized “dance” with Dell rival last year.

In announcing the deal, Dell said the companies would be “thoughtful” about how they do integration, but said the companies’ history of working with partners in the past will “accelerate our ability to bring solutions to customers in a faster way.”

Tucci suggested that the deal will close “at the middle of next year, give or take a couple of months.” And it’s precisely that long integration process where rivals see opportunity. For the cycle of the disruptor becoming the disrupted is coming around again, at least in the view of . While Dell has spent much of the last year touting its ability to execute on customer demands as it says has been pre-occupied by its impending split into two companies, now says it’s the company that will be able to get the job done for customers while Dell and EMC are busy trying to figure out the minutiae of combining the two companies.

“Two of our largest competitors are attempting a highly distracting, multi-year merger, just as we are launching two new, focused companies,” HP said in a statement released shortly after the deal was announced. “The massive debt burden Dell and EMC are taking on undoubtedly means that they will have to radically reduce R&D, and integration inevitably will create disruption as they rationalize product portfolios, channel programs, and leadership.”

However, MacDonald, whose company is also a large HP partner in the infrastructure space, called the deal a “validation of customers’ investments,” and not a cause for concern.

“Anyone who’s made an investment in either Dell or EMC can have confidence that they’ll continue to be supported,” he said.

And perhaps anticipating his rival’s viewpoint on the deal, Dell fired his own shot across HP’s bow on the conference call discussing the merger. Asked what kind of layoffs the market can expect in the wake of the combination, Dell downplayed the number of jobs lost from Dell and EMC combining, and retorted “There are other companies in our industry that are better than us at reducing headcount. Maybe you should jump on their calls?”

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