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Business Management

Dell-EMC deal would be an odd, old-school coupling

At first blush the idea of Dell buying EMC seems outlandish but the news sources are good and the reports persistent so let’s look at a few potential oddities of this much rumoured coalescence.

A strange structure. Dell returned to private company status under the control of founder Michael Dell so the suggestion that Dell would be acquiring EMC likely requires a large amount of debt to be taken on by the Texas company. Offhand, I can’t think of a comparable deal at the top end of IT ever having taken place.

An unfashionable duet. Dell made its name in low-cost hardware, especially PCs and x86 servers. Today, as PC sales fade and as more servers are no-name cheap boxes pressed into service as cloud datacentre building blocks, it is attempting to reinvent itself with software and services. EMC made its name in enterprise storage and has also been put under intense pressure by the cloud change and by the rise of a new generation of hyper-convergence, Flash and other storage vendors with smart algorithms to move and put data in appropriate tiers. These are companies that in many ways did their best work in the two decades before this one.

VMware, the elephant on the table. When EMC bought VMware for $625m in 2004 it pulled off an early candidate for deal of the century and today the virtualisation software leader is valued at about $35bn – more, in fact, than the rest of the company that acquired it. Financial machinations such as a partial divestment of VMware may well be necessary to make the deal palatable and, given VMware’s leadership in what is now a much larger market, to satisfy regulators.

Old chums and new chums. Dell and EMC have enjoyed a long relationship and the economies of scale and other efficiencies offer some logical support for pairing off. But today Dell is also cosy with hyper-convergence upstart, Nutanix. What happens to that relationship if EMC becomes part of Dell?

For now, like the old song, there are more questions than answers.

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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