Data center News
Report: Dell In Talks To Buy EMC, Partners See Potential For New Enterprise Powerhouse
Steven Burke and Joseph F. Kovar
Dell, which has been aggressively mounting an enterprise computing offensive, is in "advanced talks" to buy storage giant EMC, according to The Wall Street Journal.
The Journal reported that a deal could be reached within a week. EMC shares soared 8 percent to $27.82 in after-hours trading on news of the deal. With EMC weighing in at a market capitalization of $50 billion, the merger would rank as one of the biggest technology deals ever.
Solution providers said the blockbuster combination would reshape the enterprise computing landscape, creating a three-way battle for the data center that would pit Dell-EMC against Hewlett Packard Enterprise and Cisco Systems.
"This would take two computing giants and make them a much bigger giant that will be a very formidable force in the marketplace," said Sam Haffar, CEO of Houston-based Computex Technology Solutions, No. 130 on the CRN 2015 Solution Provider 500, which partners with both EMC and Dell. "We thought HP was going to buy EMC. Then there was talk of VMware buying out EMC, and now out of left field Dell comes into the mix. This would give Dell a huge storage stronghold to sell its compute and networking products."
Computex CTO Worth Davis said there would be little technology overlap with the potential marriage of Dell and EMC. He said Dell has a product set in areas such as security and storage that is strong in the midmarket, while EMC is focused squarely on the largest enterprise customers.
"Look at the security product set -- Dell has SonicWall, which is midmarket-focused, and EMC has RSA, which is focused on enterprise complexity," he said. "In the storage market, Dell has EqualLogic and Compellent, while EMC has XtremeIO and DSSD all-flash array project. I think it would work pretty well."
Davis said the vertically integrated stacks being brought to market by technology behemoths on an acquisition binge are making solution providers like Computex more valuable to customers.
"A great partner like Computex becomes more relevant as every vendor brings a complete vertically integrated stack to market that they all claim is the best. It is up to solution providers like Computex to help customers navigate the treacherous technology waters to make sure that they are delivering successful business outcomes."
A Dell spokesperson said the company is not commenting on the speculation around the possible merger. An EMC spokesperson said the company does not comment on rumors or speculation.
Rory Sanchez, CEO of SL Powers, a top Dell partner based in West Palm Beach, Fla. , said he sees the potential union making Dell a new enterprise computing super power.
"We would welcome this," said Sanchez. "Dell has enterprise capabilities with Compellent and a number of other companies they have bought, but this would tip the scales in Dell's favor, making the company a real enterprise superpower."
Sanchez said the deal would benefit SL Powers. "This is fantastic," he said. "We would love to see this happen. It would strengthen our relationship with Dell and VMware and open up a relationship with EMC for us. Dell is being surgical and strategic."
Given the pressure that EMC is facing from activist investor Elliott Management, the deal would amount to a lifeline for the storage giant, said Sanchez."This would be a really, really smart move on EMC's part given the pressure they are under," he said. "This would bring them into a privately owned company, making them part of the Dell party. And I don't mean a political party. I mean a party. I would think everyone at EMC has got to be dancing at the opportunity to team with Dell."
Elliott Management, which has been pressuring EMC to break up, has called a truce of sorts until Oct. 21, Reuters reported, citing people familiar with the matter.
Michael Goldstein, CEO of LAN Infotech, Fort Lauderdale, Fla., said he sees the potential union as a sign that Dell's $24.4 billion leveraged buyout is gaining momentum.
"This would give Dell all the cards it needs to dominate the enterprise market against Cisco and HP," he said. "This would be a groundbreaking deal. I'd love to see it happen. This would give Dell another tier in the storage space, bringing them deeper into the enterprise."
Goldstein said he sees Dell founder and CEO Michael Dell more determined than ever to dominate the enterprise computing landscape since taking Dell private in 2013. "This deal would reinforce Michael's vision to transform Dell," he said. "Michael is unstoppable."
Jamie Shepard, senior vice president for health-care and strategy at Lumenate, a Dallas-based solution provider and longtime EMC partner, said the deal would instantly make Dell a formidable enterprise challenger.
"I think Dell is very interested in the big data and flash array businesses of EMC," he said. "Dell has been partnering with others on flash storage and PCIe-based shared storage, while EMC has been working hard on developing these technologies. A merger would accelerate Dell's server business."
Furthermore, EMC's software focus would be well-served in a merger with Dell, Shepard said. "They could take the EMC software -- and EMC's storage is all about the software -- and marry it to Dell servers. That would accelerate EMC's software-defined data center strategy."
However, Shepard said, there would be major issues. For instance, he said, VCE would likely be finished because such a merger would likely end EMC's relationship with Cisco and the Cisco UCS technology.
"We are selling UCS as the leader out in the market," he said. "We do VCE, and the VersaStack offering with UCS and IBM's flash storage. The majority of our customers are moving away from Dell towards Cisco UCS. If EMC went with Dell, it could hurt the EMC business."
Any type of merger between Dell and EMC would be hard to manage, said Rich Baldwin, CIO and chief strategy officer at Nth Generation Computing, a San Diego-based solution provider and longtime partner of HP.
"It would take a couple of years to put the two together to operate as a single company," Baldwin told CRN. "They have totally different sales organizations and channel programs. EMC has been the big enemy to Dell. There could be a lot of attrition in a merger because not everybody would agree with the goals of the combined company."
While both vendors have experience with mergers and acquisitions, none of those past acquisitions have been anywhere as large as a potential merger between Dell and EMC, Baldwin said. "Dell acquired Compellent and EqualLogic, but they were startups," he said. "EMC is on a whole different level for Dell."
PUBLISHED OCT. 7, 2015