Dell’s $60 Billion Merger with EMC

By: Gursahib Singh Buttar

Dell Inc. on Wednesday completed its $60 billion deal to acquire EMC Corp., the largest technology merger in history. The deal, announced Oct. 12, took nearly 11 months to complete. What makes this deal even more interesting is that Dell, with a valuation of around $25 billion, was by far the smaller fish at approximately half the size of EMC. The merger was extraordinarily complex. Dell, which is privately held, purchased not only EMC but its Byzantine federation of wholly and partially owned subsidiaries.

Those include cybersecurity firm RSA Security LLC, software-development company Pivotal Software Inc., cloud-software company Virtustream and virtualization software vendor VMware, which will remain public. Combining Dell and EMC gives the companies an opportunity to take advantage of complementary strengths in sales. Dell, which ranks third in international PC sales, according to IDC, traditionally has appealed to smaller and midsize companies. EMC, IDC’s No. 1 storage vendor by sales, has made inroads in large enterprises.

Dell has been looking to move away from the server business, which has grown commoditized in recent years and get deeper into enterprise with private cloud computing and storage where it could compete with IBM, HP and other traditional vendors, as well as Pure Storage and newer vendors. There’s no getting around the fact that this is a huge gamble on Dell’s part, forcing it to find a new financial partner to make the deal happen, but the fact is this is the only way it could get big enough to compete in this space.

Together, the two companies can presumably sell far more of Dell’s products to EMC’s customers, analysts say. Many if not most mergers actually destroy value, and merging two companies that have had trouble renewing and reviving themselves rarely succeed when combined. The merger is thus extremely risky. EMC and Dell are in complementary segments of the computer industry and if all goes well the two companies might be more valuable together than apart. 

With the supply chain that they have and the go-to-market strength and the scale, they are very well positioned both in the new areas of technology and in the existing areas of technology today. The new company, to be named Dell Technologies, will aim to be a one-stop shop for information technology sold to business. The company employs about 140,000 people globally and will maintain operations in Hopkinton, Mass., where EMC was located. With $74 billion in revenue, Dell Technologies will be the world’s largest privately controlled tech company.