Data Center

Dell Kicking EMC's Tires

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).

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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

mhhf1ve 10/12/2015 | 4:28:52 PM
Re: Looks like this is about to be made official Yup. Wow. This is going to be a huge deal when it's complete. Does this mean Dell will ditch its consumer devices? Or is this somehow part of a consumer devices strategy, too, but I'm not seeing the connection?
[email protected] 10/12/2015 | 3:57:57 AM
Looks like this is about to be made official It would seem that Monday (Oct 12) is the day this will be announced.... what will the value of the deal be? Various reports have various valuations, from $50 billion to $65 billion...




mhhf1ve 10/9/2015 | 7:22:38 PM
Re: Change This move does seem like something that Dell could have only attempted as a private company without shareholders questioning the wisdom or effects on the immediate bottom line. Presumably, Dell is doing well enough to think the acquisition of EMC will be a long-term good move.
mhhf1ve 10/9/2015 | 7:15:12 PM
Re: Debt Dell is a private company. So.. it answers to Dell, not its stock price. It's also already heavily in debt, so yes, it still needs to satisfy its stakeholders. Presumably, though, Dell has the blessing of its board.. and acquiring EMC does seem to make some sense to improve Dell's overall business strategy.
inkstainedwretch 10/9/2015 | 3:25:46 PM
Debt I take a caustic view of mergers & acquisition specialists; they get paid big money whether the deal makes financial sense or not. If Dell and EMC want this bad enough, the M&A guys will find a way to make it happen. It'll be up to someone else to say "no" if they think the debt burden will be unbearable. It might be investors -- but many investors just want to see movement in the stock price, not caring whether it's up or down. -- Brian Santo
danielcawrey 10/9/2015 | 3:16:25 PM
Change Dell has really shifted itself from a hardware company to a more full-featured services business. A deal with EMC makes a lot of sense to me, as it would continue Dell's business services strategy.

However, the fact the company has so much debt should be a concern for any financing deal; let's not forget the company went private in order to make some serious changes to its operating structure. 
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