- A definitive agreement was announced for Dell to buy EMC for $67 billion in a record tech deal.
- The deal could shake up the technology market in a significant manner; other large tech companies (such as HP and IBM) have announced they are divesting or aiming to become smaller players.
- The Dell and EMC together will create a 'mega-technology company'.
Since Dell went private two years ago, they have been able to at least maintain their market share within both its respective server and their PC business, but have struggled to grow within the large enterprise and higher margin markets. EMC is a long-time leader in enterprise storage solutions, but have been challenged to keep up with new trends and cheaper data center storage costs in this rapidly changing and dynamic market. IHS believes that together as one entity, Dell and EMC will have one of the most complete and unified portfolios, which should provide them additional reach into larger business opportunities they may have not had access to as individual companies. Allowing them to better compete against the likes of IBM, HP, and Cisco in the growing trend of unified IT solutions.
On paper, the deal appears to be the best path for both companies. Financial success is still an open question mark. Both companies, individually, are considerable in size, and both already have extensive product portfolios. Integrating these portfolios will likely require major changes and some amount of scaling back in any doubling of efforts. IHS doesn't believe initially this will drive divesting into a lower-margin server or PC business from Dell, but, if down the road and financially, the low margin business becomes too much a burden, then it is possible.
The immediate challenge of course will be in the integration of the two massive companies. The newly combined entity will have to maintain cashflow to pay off the debt it will be accruing, while still being limber enough to react and adjust to this market. Being a private company under Dell does allow them greater flexibility as they won't have to disclose or answer to shareholders, but as is the case, the bigger the ship becomes, the harder it is to turn.