Last week, Dell announced it would merge with data storage company EMC in a record $67 billion deal – the largest deal ever between two technology companies. The move makes sense for Dell, which has been struggling in the sluggish PC market, because it will allow it to expand into other, potentially more profitable areas.
It’s also a good deal for EMC, which has faced tough competition in the storage arena, and which has been looking to make a change for over a year. Recently, Elliott Management Corp. had been pressuring EMC to spin off its VMware unit, a move the company was resisting and will not need to make now that the deal with Dell has been made.
EMC has a market capitalization of about $50 billion. According to International Data Corp, Dell currently ranks third in global PC shipments.
What does it all mean?
While the record-making deal means good things for each of the companies, what will it mean for customers of the two companies, if anything?
Despite some speculation to the contrary, the deal likely won’t radically reshape the technology market the way a deal between companies with competitive technologies might have (think Oracle’s purchase of Sun Microsystems, for example). That’s primarily because the companies’ portfolios are fairly complementary. In fact, they have worked together off and on for years. Dell is already a big reseller of EMC products. According to CompterWorld, EMC earned 8% to 9% of its revenue from its relationship with Dell. And Dell is no stranger to the storage business itself. Several years ago, Dell invested more than $2 billion to expand its own storage products.
Because the companies’ portfolios don’t overlap significantly, CIOs won’t have to worry much about the combined company abandoning product lines, said Charles King, an analyst with Pund-IT. Instead, the merger may make it easier for companies to accomplish certain tasks, such as adopting hybrid computing models.
A January 2015 State of the Cloud Survey by RightScale found hybrid cloud arrangements are the preferred strategy of most companies, with 82% of enterprises reporting they had a hybrid cloud strategy. But implementation can been challenging.
Combined, Dell/EMC has the potential to offer private and hybrid cloud systems as alternatives to public cloud services such as those offered by Microsoft, Amazon Web Services and Google and to help them in the process of actually moving systems to the cloud.
Michael Dell acknowledged this is 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,” he said.
While much remains to be seen as the merger progresses, it appears that for the most part, the Dell/EMC merger won’t be a bad thing for the average CIO and his or her respective organization.
