The talks were secret. The stakes are enormous. And the deal is not yet confirmed.
But if all goes as expected, one of the world’s largest PC companies will buy the world’s largest data storage firm. In a deal valued at $53 billion by the Financial Times,
Dell is expected to announce it is acquiring EMC on Monday.
As Re/Code put it: “the largest tech deal of all time.”
“We’re continuing to evolve the company into the most relevant areas where I.T. is moving,” founder Michael Dell told the New York Times, which described the acquisition as the biggest tech takeover of all time. “This deal just accelerates that.”
“This merger bodes well for the next generation of innovator,” said Matt McIlwain, a managing director at Madrona Venture Group, told Bloomberg. “Legacy tech companies have little alternative than to use financial engineering to keep shareholders happy in an era of fundamental technology disruption.”
For Dell and EMC, that disruption has proven brutal. The computer maker, out-gamed by Apple, faced a market that wasn’t really about computers anymore.
“We’ve been investing heavily in research and development around converged infrastructure and software-defined technology — both storage and networking,” Dell, who took the company private in 2013, said earlier this year. “… There’s been an explosion in the amount of data that’s being created, and that’s fueled an explosion in the demand for infrastructure … and it’s not just computers and servers.”
EMC, meanwhile, wants to grow its business outside of Wall St. scrutiny.
“Taking EMC private would let the company invest in new businesses and rejigger its aging ones without the scrutiny and pressure of investors, said a person familiar with the company’s thinking,” Bloomberg wrote. “EMC sees the future of the enterprise technology market as one where servers and storage are sold together as integrated packages of hardware and software, and the deal would create an entity that could provide such products using EMC’s strength in storage and Dell’s in servers.”
If this sounds like dry business-school speak, the machinations behind the deal are the stuff of corporate novels. Re/Code reported that even high-level executives were left out of the negotiations, with Dell of Dell and EMC’s chief executive Joe Tucci going at it mano a mano.
“For a deal expected to be the largest tech deal of all time, it is telling that top executives at Dell, who would have normally been consulted ahead of the deal announcement were not informed of the talks,” Arik Hesseldahl wrote. “Many of them were traveling overseas when the news first leaked, sources briefed on the talks” said.
The reported price dell will pay for EMC: $27.25 per share plus the additional value of tracking stock — to account for EMC’s stake in VMWare, a cloud computing company — making the deal worth more than $30 per share.
And some thought the Dell deal a bit raw.
“The chatter is that VMware will be a ‘tracking’ stock after the merger,” Jay Somaney of Forbes wrote. “More like a shell stock with assets stripped down to bare bones.”
“Would Dell be interested in EMC? Why not?” Joe Wittine, an analyst at Longbow Research, wrote in a research note. “From the perspective of the world’s largest PC company, a bigger enterprise portfolio is alluring, particularly one that has made the big bets on IT’s transformation ahead of time.”