by Steven Burke and Matt Brown on October 12, 2015 on crn.com
Dell has acquired EMC in a $67 billion deal that transforms the onetime PC maker into a $90 billion computing powerhouse with its sights set on dominating the enterprise IT market.
The deal — the largest in the history of the IT business — creates a new world order in the intensely competitive enterprise computing market. With the deal, Dell instantly becomes an enterprise superpower with a prominent position in nearly every key enterprise technology segment, including servers, storage, virtualization, networking, cloud computing services, security, big data and IT services.
[highlight type=”one”]”This is a major pendulum swing in the enterprise IT market to Dell,” said Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 232 on the CRN 2015 Solution Provider 500. “This makes Dell the predominant enterprise computing company for customers and partners. [Dell Founder and CEO] Michael [Dell] was determined to make Dell the enterprise computing market leader, and a merger with EMC and VMware was the quickest way to get there.” Dell, Round Rock, Texas, will offer EMC shareholders $33.15 per share in a deal that includes EMC subsidiary VMware as a tracking stock that amounts to about $9 per share. The deal includes $40 billion in financing from private equity players, including private equity giant Silver Lake Management.[/highlight]
The acquisition comes only two years after Michael Dell, along with Silver Lake, pulled off one of the largest technology leveraged buyouts in history — a near-$25 billion deal to take the company he founded in his college dorm room private.
Dell, a $60 billion company, is positioned as the world’s second-largest server vendor with a robust storage, networking and security business. The deal adds to that $25 billion EMC’s heavyweight status as the storage market leader and $6 billion EMC subsidiary VMware’s position as the No. 1 virtualization software provider. It also includes a well-respected cloud computing services business ready to do battle with Amazon Web Services as a result of EMC’s $1.2 billion acquisition in July of enterprise computing cloud services provider Virtustream.
EMC’s federation of companies also includes RSA’s enterprise security prowess and Pivotal’s highly regarded big data software portfolio.
EMC and Dell both have very strong security offerings, with Dell focused on the client market and the midmarket and EMC’s RSA unit focused on the enterprise.
The deal also pulls EMC out of a contentious relationship with activist investor Elliott Management, which had been demanding the conglomerate split up its so-called federation of companies in order to boost shareholder value.
EMC’s share price had declined nearly 15 percent over the past year before getting a boost last week by news of the Dell takeover.
Elliott Management and EMC had been under a truce of sorts, which Elliott Management had extended through October in order to give EMC the opportunity to respond to its demands.
[highlight type=”one”]Future Tech’s Venero, one of the first solution providers to team with Dell to crack the enterprise market, said those SP500 companies that do not have Dell in their lineup are going to have to reassess their vendors. “You’d have to be crazy as an enterprise-focused solution provider not to have Dell as one of your primary vendors,” he said.[/highlight]
Several SP500 CEOs also predicted that the blockbuster deal will result in more solution providers rushing to make a bigger bet on Dell. They said the deal is sure to have a ripple effect on both Hewlett-Packard, which is often sold as a server with EMC gear, and Cisco Systems, which has been a key part of the EMC-VMware VCE converged infrastructure partnership.
[highlight type=”one”]”I have to protect my turf,” said the CEO of one of EMC’s top partners that is planning to invest more heavily with Dell. “I see our Dell business growing.”[/highlight]
The CEO of another SP500 company, who did not want to be identified, said he also sees a rush to Dell. “There are going to be big opportunities for the channel with this deal,” said the CEO, who noted that he has already made his plans to go to DellWord next week. “Dell and EMC both recognize the value of the channel. Dell is going to be doing some channel mapping with this deal. It will be interesting to see where they look at adding to their partner base.”
The CEO said he sees similarities in the Dell and EMC cultures. “They both come from an aggressive direct sales culture,” he said. “But they both have learned that you can’t really succeed in the enterprise without a strong channel. The Dell culture is a strong culture that will stand up well to the EMC culture.”
Cisco partners said a Dell acquisition of EMC effectively kills once and for all Cisco’s six-year participation in VCE. Furthermore, they said it could open the door for Cisco to buy a storage company. “The compute and networking in VCE is going to go from Cisco to Dell,” said an SP500 CEO.
Solution providers said Dell has the enterprise technology vision and muscle to pull off the EMC integration. Dell Enterprise Solutions Chief Commercial Officer and President Marius Haas, a former HP executive, has built a formidable team including Chief Technology Officer Paul Perez, a highly regarded former Cisco executive, and President of Worldwide Commercial Sales Rory Read, a 30-year industry veteran who was previously CEO of AMD.
[highlight type=”one”]Venero predicted that the blockbuster merger will cause a significant shift in the enterprise in Dell’s favor. He predicted that Michael Dell will make EMC a more nimble and entrepreneurial organization for its customers and partners.[/highlight]
[highlight type=”one”]”Dell competitors are going to feel the heat now that Michael is driving the EMC enterprise product set as part of Dell’s portfolio,” he said. “There is nobody more focused and driven in this business than Michael. If you’re an enterprise customer and partner, Dell is where you want to be.”[/highlight]