12 October 2015 – I have just returned from one of my jam-packed U.S. trips that squeezed in stops in Boston, Chicago, D.C., Miami, and NYC. Other than a global conference on U.S./EU anti-trust law, all of the meetings had technology as their subject matter: artificial intelligence, e-discovery, mobile geolocation, and Safe Harbor/geozoned clouds.
This last subject matter actually consumed most of my meetings as my U.S. corporate client base with operations in Europe has moved very quickly to such clouds. And the whole “cloud thing” has moved front and center in today’s Dell/EMC acquisition announcement.
As the Financial Times noted in its Dell/EMC coverage, it is “crunch time” for Michael Dell and Joe Tucci, the chief executives of Dell (you know, that computer company) and EMC (the data-storage giant). The deal is a $67 billion gorilla, the biggest tech marriage … ever. For a summary of the deal click here.
The main stumbling block seems to be the large amount of debt Dell (together with Silver Lake, an allied private-equity firm) will have to raise to buy EMC. Even if the deal doesn’t happen, the possibility is proof that the computer industry is shifting into the cloud more quickly than many had expected. And while Dell, EMC and other “old” industry giants are scrambling to regroup, Amazon Web Services, the online behemoth’s cloud-computing arm, looks ever more likely to be the new leader of the pack.
Oh, and there are a lot of other factors, too. I have been lucky these past three years to have had the opportunity to spend a lot of time with EMC … playfully called the “Evil Machine Company” in the industry … via its brilliant tech summits and one-to-one management chats to learn the intricacies of cloud, storage, data lakes (and data “pools”), SAN switches, operating systems, etc. So I have spent a lot of time learning about the company.
In storage, EMC and Dell’s storage arrays overlap in many, many markets. Quite frankly, EMC’s R&D teams probably surpass Dell’s if only because they’ve been at it for longer and have attacked a wider range of problems. Over time, it would probably make sense for EMC’s storage to dominate the combined range.
And if the deal goes through, what of the many parts? Documentum? For Sale. An unnecessary document management company. Pivotal: a tough one. Its consulting arm would give Dell’s a jolt of “cloud cred”. And, hey: GE’s investment in Pivotal is a prize, not least because GE looks to be a mover and shaker in the internet of things. A nice friend to have.
On the server side … well, I am not versed enough to say. But for sure there are bits and bobs that the likes of Cisco, HP or Oracle would like to buy.
One biggie is VMware. I have always thought EMC has done well over the years by letting VMware operate independently, while also giving its efforts momentum. I chatted with Jack Mulkane (an “industry watcher” for Forrester) who told me “EMC was able to pull off this trick because ESX and vSphere [two key VMware products] became de facto standards without its active help. Indeed, EMC just sat back and watched server consolidation drive demand for networked storage”. So the upshot is Dell would let VMware continue pretty much as it does today. And if you scan the EMC 10K (yes, I know, I need to broaden my reading material) the VMware stake offers some not-inconsiderable profits.
And I have not even mentioned the computer security company RSA. What will become of it?
And then … the purge. If Dell, as is widely reported, is borrowing tens of billions of dollars to pull off this deal it’ll be hard to see the carpet for the pink slips in some offices. Plenty of offices will go because the combined company won’t need multiple offices in many cities and will need to save cash in order to be sure of paying off the interest on its acquisition war chest.
Will the deal come off? We’ll see (boy, what a hedge!) The industry pundits I spoke with said “when HP and EMC were talking about coming together, the chatter/deep analysis was less detailed than it’s been in the last few days. If they can raise the $$$, it will happen”.
