Dell Announces EMC Purchase In Biggest Tech Deal Ever

For nearly a decade, Dell-primarily through acquisitions-has been rapidly expanding its capabilities in such areas as storage, networking, security, software and the cloud and expanding beyond its roots as a supplier of commodity PCs and servers.

Apart from its expansion in the world of cloud computing, Dell will leverage EMC’s resources to expand its presence in large enterprises. Michael Dell will remain as chairman and CEO of the combined companies. The acquisition of EMC “improves the company’s profitability profile as a result of better product mix, and also enables the opportunities for revenue and cost synergies”, said Standard & Poor’s credit analyst David Tsui.

Michael Dell said the merger with storage giant EMC makes Dell “even more powerful” as it moves to comprehensively serve customers across all key enterprise computing segments.

EMC’s board has approved the merger, which includes a 60-day “go-shop” provision that allows EMC to solicit bids from other parties, though experts say they doubt that will happen.

Michael Dell and related stockholders will own about 70 percent of the company’s common equity, excluding the tracking stock, similar to their pre-transaction ownership.

Dell’s historic rivals Hewlett-Packard and IBM are both slimming down under the market pressures.

Joe Tucci of EMC will stay on as chairman and CEO of that company until the closing of the deal expected in the second or third quarter of 2016. Dell’s hefty purchase of EMC is just the latest in a string of monster M&A transactions, topped (so far) by the 0-billion pursuit of brewer SABMiller by Anheuser-Busch InBev. Of course, VMware could go hunting for a buyer of its own, but a deal would most likely need the Dell group’s final say-so and that idea doesn’t look terribly likely right now.

That initial investment delivered a 90% paper gain by November past year, according to reports at the time.

But that model hasn’t kept pace with today’s consumer market, where buyers aren’t interested in waiting several days for a customized Dell desktop to be assembled and shipped.

The bottom line, is that Dell-EMC combination will give Dell what it needs to compete with the likes of HP, Cisco, IBM and, increasingly, lower-end players such as Huawei, said O’Donnell.

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.

The merger also has wide-ranging implications for EMC’s conglomerate of businesses.