Dell confirms acquisition of EMC for US$67bn — largest tech acquisition ever

12 Oct 2015

Dell's US$67bn acquisition of Dell is the largest in tech industry history

Dell is taking over EMC in a deal worth US$67bn in what is the biggest acquisition in tech industry history.

Dell says it will pay US$24.05 a share in cash plus tracking stock in EMC-owned VMware, worth US$9 a share, bringing the overall purchase price to US$33.15 a share. Each share of tracking stock in VMware is worth US$81.78. EMC currently owns 81pc of virtualisation player VMware.

That’s 27pc above EMC’s closing price on 7 October before news of the proposed merger surfaced.

The combined Dell and EMC will create a US$2 trillion enterprise tech giant with interest in servers, storage, virtualisation and PC, as well as software defined networks, hybrid cloud, converged infrastructure, mobile and security.

“The combination of Dell and EMC creates an enterprise solutions powerhouse bringing our customers industry-leading innovation across their entire technology environment,” Dell CEO Michael Dell said.

“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 centre, converged infrastructure, hybrid cloud, mobile and security.

“Our investments in R&D and innovation along with our privately-controlled structure will give us unmatched scale, strength and flexibility, deepening our relationships with customers of all sizes. I am incredibly excited to partner with the EMC, VMware, Pivotal, VCE, RSA and Virtustream teams and am personally committed to the success of our new company, our customers and partners.”

A big bet on the future of Dell and EMC

In Ireland, Dell and EMC between them employ 6,000 people and, while the companies have said the merger means complimentary roles, the question is does it actually also mean duplication?

It is too early to say as many of the roles and responsibilities in Ireland for Dell and EMC are along distinct product lines and, if anything, Dell and EMC were storage partners for the best part of the last two decades.

The acquisition of EMC futureproofs Dell in a way that prepares it for a future where selling PCs won’t be enough.

Acquiring EMC gives Dell capabilities beyond the PC such as cloud storage and corporate software and mobile devices.

It also proves to have been a shrewd move by Michael Dell in taking Dell private with Silver Lake two years, which removed many of the distractions of being a publicly-traded company.

However, it is also a risk in that it would mean Dell taking on a huge amount of debt.

It also goes against the grain of consolidation in the tech sector where rivals like HP and players like eBay/PayPal are splitting themselves off into smaller companies to be more nimble and able to respond to changing trends.

For EMC, it unburdens the company from pressure from investors, including Elliot Management, a US$27bn hedge fund, which believes the company has been underperforming.

A previous potential sale of EMC to HP fell through.

“I’m tremendously proud of everything we’ve built at EMC – from humble beginnings as a Boston-based start-up to a global, world-class technology company with an unyielding dedication to our customers,” said Joe Tucci, chairman and chief executive officer of EMC.

“But the waves of change we now see in our industry are unprecedented and, to navigate this change, we must create a new company for a new era. I truly believe that the combination of EMC and Dell will prove to be a winning combination for our customers, employees, partners and shareholders.”

EMC image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years