NEW YORK: Dell said Monday it was buying EMC, the world’s largest data-storage provider, for US$67 billion in a record tech tie-up to accelerate its move into the cloud and mobile market.
The mega merger would combine Dell, whose core global personal computer business is facing declining PC demand, with EMC’s strength in enterprise storage.
Dell said the acquisition of EMC “will create the world’s largest privately controlled, integrated technology company” in the US$2 trillion information technology market.
Founded in 1984, the Texas-based Dell has been struggling against the growing success of smartphones and tablets, and founder Michael Dell and private-equity firm Silver Lake Partners bought out other shareholders in 2013 to take the company private.
With EMC, Dell will beef up its firepower in storage and data management for businesses and could take on industry behemoths IBM, Hewlett-Packard and Cisco.
The deal also gives Dell cloud software giant VMware, which is 80 per cent owned by EMC. Dell said that VMware will remain an independent, publicly traded company.
“We believe a deal with Dell would make sense for EMC and over time we expect the market to continue to consolidate to larger players that are able to offer full hardware solutions as opposed to piece parts,” said Sherri Scribner, a Deutsche Bank analyst.
The tie-up will make Dell “exceptionally well-positioned for growth in the most strategic areas of next generation IT including digital transformation, software-defined data centre, converged infrastructure, hybrid cloud, mobile and security,” chairman and chief executive Michael Dell said in a statement.
Dell is hoping to offset the continued weakening of the PC market, where sales volumes fell 10.8 per cent in the third quarter, according to IDC.
The combination with EMC gives it the scale and capacities to expand its offer in cloud computing, a rapidly growing market.
Businesses are buying fewer servers, considered expensive, and are turning toward cloud infrastructure services such as those offered by Amazon Web Services, Microsoft, Salesforce and Google.
The shift toward the cloud has hurt EMC’s storage business, where sales rose only 1.0 per cent in the second quarter compared with double-digit growth five years ago.
“If you plug Dell servers into EMC, you have the potential of a global Web solution in a box,” said Silicon Valley analyst Rob Enderle of Enderle Group.
“You get something of the scale of the old IBM, but able to focus on the new market.”
Dell could combine with EMC to power big company networks, from back-end servers to the laptop computers employees use on the go, according to analysts.
“They are one of the only companies who can come in and provide end-to-end solutions,” Enderle said.
“Assuming you can connect the dots; say Microsoft Surface or Google Chromebooks tied into a Dell back-end. You could do some interesting things no one else can do right now.”
EMC has been under pressure from US activist investment fund Elliott Management, which took a roughly 2.0 per cent stake in EMC last year. Elliot notably pushed for the independence of VMware, which had been reportedly in the crosshairs of HP, Oracle and Cisco.
“It has been rumoured for a long time that EMC was heading for some fate other than staying independent,” said Forrester analyst Glenn O’Donnell. — AFP