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Dell to Buy EMC for $67 Billion

Lorna Garey**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in July-August 2015.**

Dell said Monday that it will purchase EMC for approximately $67 billion, making Dell the largest privately controlled integrated technology company.

VMware, which is majority-owned by EMC, will remain a publicly traded business, and on a call for press and analysts, executives stressed that VMware will continue to work with HP, IBM and others.

Early reaction to the deal is mostly positive.

“This speaks to the whole notion that you’ve got to sell an integrated system,” says Art Wittmann, vice president of the Informa Business Technology Network. “It’s a heck of a response to Cisco’s and HP’s weakness in storage, and Lenovo/IBM’s muddled strategy. It also gives Dell some incredible security and virtualization assets as well as a level of enterprise gravitas. It’ll take some doing to align all their products, but if they execute right, they’ll be a force to be reckoned with.”

The agreement calls for EMC shareholders to receive $24.05 per share in cash in addition to tracking stock linked to a portion of EMC’s economic interest in the VMware business. Overall, execs say the product portfolios are complementary, with minimal overlap.

“The combination of Dell and EMC creates an enterprise solutions powerhouse, bringing our customers industry-leading innovation across their entire technology environment,” said Dell founder and CEO Michael Dell in a statement. “Our new company will be exceptionally well-positioned for growth in the most strategic areas of next-generation IT, including digital transformation, software-defined data center, converged infrastructure, hybrid cloud, mobile and security.”

On the call, Mr. Dell and Joe Tucci, chairman and CEO of EMC, reiterated Dell’s open approach and highlighted the fact that as a private company, his team has more flexibility in terms of investments in R&D and the ability to restructure without quarterly pressure from Wall Street.

“We’re enjoying life as a privately controlled company, thank you very much,” he said. Mr. Dell went on to praise EMC’s federation model and said he looks forward to adding Dell-incubated products like SecureWorks and Boomi to the mix.

For Dell partners, gaining access to the EMC storage portfolio as well as closer ties to VMware, Pivotal, VCE, RSA and Virtustream is likely to open doors to large-enterprise customers and put the company’s products on a level – or better – playing field versus Cisco, HP and IBM.

“I see two immediate benefits for Dell,” says David DeCamillis, VP of sales and marketing for Platte River. “A quick way for Dell to increase [its] market share is …

… in the enterprise storage arena; and, now that Dell has fully invested in the channel, adding the EMC VARs to Dell’s growing partner mix.” DeCamillis points out that previous storage acquisitions by Dell included Compellent and EqualLogic, both vendors with strong channel programs.

“From a channel perspective, this new acquisition should also fit very well into Dell’s ongoing and growing commitment to the channel,” he says.

Mr. Dell said EMC does have strong, if often overlooked, midmarket technology offerings and that Dell’s channel will help tell that story, saying its “channel is unmatched for scale and reach.” Tucci points out traditional silos around server, storage, networking and management.

“Very often a customer would buy from four different vendors and integrate themselves, which would prove to be very expensive,” Tucci said. The future is cloud and converged infrastructure for both midmarket and enterprise, and Tucci says the combined company is well positioned to address that.

Mr. Dell also repeatedly brought up his company’s focus on private and hybrid cloud and hyperconverged, software-defined data centers, but Drew Lydecker, CEO of Avant, says this deal is actually about public cloud, too.

“It’s a sign of the times for big OEMs that rely heavily on channel,” says Lydecker. “If you’re not saying ‘holy smokes — the cloud is more powerful than anyone thought,’ you’re not paying attention.”

Mr. Dell says future investments will include security, particularly exploring synergies among RSA, SecureWorks, SonicWall, and AirWatch. He also cited the increased importance of systems-integrator relationships.

Following completion of the transaction, Mr. Dell will lead the combined company as chairman and CEO. Tucci will continue as chairman and CEO of EMC until the transaction closes, likely in mid-2016; no official word on Tucci’s ongoing role. Dell’s headquarters will remain in Round Rock, Texas, and the headquarters of the combined enterprise systems business, including the servers group, will be at EMC’s facility in Hopkinton, Mass. Mr. Dell said there are no plans for significant reshuffling of personnel and would not comment on any planned layoffs before the deal closes. He did say that the company recently added 2,000 new salespeople, bringing its inside sales team to more than 20,000.

Follow editor in chief @LornaGarey on Twitter.


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