Dell is reported to be in discussions to buy EMC in a takeover that would probably be valued at about $50 billion.
Neither company has commented on the deal, which was first reported by The Wall Street Journal. The WSJ's item was extremely specific, noting that Dell Technologies (Nasdaq: DELL) is partnering with private equity firm Silver Lake in the negotiations; that if the deal is consummated, EMC Corp. (NYSE: EMC) acquisition VMware Inc. (NYSE: VMW) would be spun off; and that if EMC accepts Dell's offer, the deal could be announced as early as next week.
Bloomberg subsequently reported that JP Morgan Chase, Barclays, Bank of America, and Credit Suisse have all been approached about financing the deal.
EMC's fate has been a matter of conjecture for months. The company is known to be engaged in a "strategic review," in response to investor dissatisfaction, notably from Elliott Management. Both Cisco Systems Inc. (Nasdaq: CSCO) and HP Inc. (NYSE: HPQ) reportedly kicked EMC's tires over the summer, and recently there was even speculation that VMware, in which EMC owns an 80% stake, might take over its parent (see VMware May Buy Its Parent EMC – Report).
Analysts weighing in on the report note that the deal might be hard for Dell to pull off, given that it has $12 billion in outstanding debt after taking itself private. On the other hand, monstrous debt loads haven't stopped financial institutions from bankrolling Altice (which is buying both Suddenlink Communications and Cablevisión ), for example.
From a business perspective, the combination makes some sense, marrying EMC's strength in IT with Dell's server business. The rationale for combining Dell and EMC is essentially the same rationale for HP buying EMC.
A Dell/EMC combination would be in a better position to compete in the data center/cloud services market against potential rivals such as Google, Amazon, and Microsoft.
And if the deal goes through, it would be the largest deal among technology companies ever, eclipsing the $37 billion Avago is spending on Broadcom.
— Brian Santo, Senior Editor, Components, T&M, Light Reading