October 23, 2015

    By Dino Balafas

    Dell and EMC are merging in one of the biggest, most expensive deals in the history of tech. What does the move indicate for the future of similar companies in the ever-changing world of IT?

    Rumors have been floating around in the tech world about a possible merger between EMC, one of the most prominent IT companies, and Dell, a consumer PC business. On Oct. 12, the rumors proved true when the companies officially announced what Wired is calling “an acquisition for the ages.” What makes this deal so important, and what does a merger of this magnitude mean for those in the IT industry?

    The Deal

    According to Wired, Dell is reportedly acquiring EMC for “approximately $33.15 per share, valuing the transaction at approximately $67 billion.” This makes the Dell-EMC deal one of the largest mergers ever in tech. To put that in perspective, the previous standard bearer was the deal HP and Compaq struck back in 2001 for $25 billion. However, what’s more interesting than the price tag of the acquisition is how this deal will reposition Dell as a potential frontrunner in the IT space.

    As CNN Money puts it, “EMC is a behemoth of a corporate IT business.” Not only is it one of the biggest providers of storage hardware, but EMC also owns the security company RSA and has an 81% stake in VMware  the biggest name in the world of virtualization software.

    Interestingly, you could argue that the merger was set in motion all the way back in 2009, when Dell bought Perot Systems for $4 billion, launching the company’s transformation from solely a PC business to a major corporate IT solutions provider. Nevertheless, CNN Money quotes Michael Dell as saying that the merger “creates an enterprise solutions powerhouse” that poises the company “for growth in the most strategic areas of next generation IT.”

    Changing IT

    Wired notes 451 Research analyst Simon Robinson’s agreement that this deal puts Dell “firmly in the center of the IT stage in a period of huge change.” What’s more, it gives the new company “real enterprise credibility.”

    And that credibility will go a long way in light of the emerging notion that “it’s Amazon’s world, and everyone else needs to either join together or get out of the way.” EMC CEO Joe Tucci’s comments regarding the acquisition articulate a similar sentiment that to survive in the changing industry, “we must create a new company for a new era.”

    Robinson characterizes the the Dell-EMC deal as a move “the entire industry has to figure out how to respond to.” That could mean a similar move is on the horizon for other tech giants, who may soon find themselves trailing the pack in a quickly changing industry. But with many large tech companies choosing to downsize or split, the success of such a large-scale merger for Dell and the effect it will have on similar companies remains to be seen. Stay tuned.

    (Main image credit: Wikimedia)

    Category: news