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Dell to Buy EMC in Deal Worth About $67B
- selimthegrim 11y agoSo, how much more vulnerable does this make HP with its upcoming split?
- aaronbrethorst 11y agoMeh, EMC has been a part of the walking dead for years. There were rumors a few months ago that VMware—a spinoff from EMC—was going to acquire EMC. Dell doesn't care. They've been private for a couple years. No one's going to pummel their stock tomorrow morning. Anyway, HP has much more to fear from HP than they do from the synergistic effects (lol) of Dell+EMC. HP is a total disaster, and is far more likely to kill itself off than die from consolidation around it.
- kbuck 11y agoSmall correction: VMware isn't a spinoff of EMC, it's a subsidiary. VMware was originally founded in 1998 and acquired by EMC in 2004.
- geofft 11y agoMy reading (and another comment implied the same thing) was that the rumors were that EMC would simultaneously spin off VMware and then get the rest of itself acquired by the newly-independent VMware. Here's a Re/Code analysis that got picked up by Fortune: https://recode.net/2015/08/05/emc-considers-a-buyout-by-its-own-subsidiary-vmware/ https://recode.net/2015/08/05/emc-considers-a-buyout-by-its-...
- vonmoltke 11y agoCan't spin off a subsidiary that is already a separate, publicly-traded entity. VMWare is only a subsidiary because another corporation, and not a real person, owns a majority of the stock.
- aaronbrethorst 11y agoAh interesting, I stand corrected
- hkmurakami 11y agoSo numbers from the article: Dell went private in 2013, valuing itself at $23B. EMC has a market cap of $53.6B (Dell would have to pay some sort of premium on this). Dell is raising $40B in debt to finance the purchase. Let's say Dell pays a 20% premium on EMC and buys it for ~$65B. Let's also say that Dell's market cap has increased somewhat since 2013, since the market has generally been a bull market. Let's say that their $25B valuation is now $30B. So the companies combined have a valuation of $95B, with $40B in debt. They both seem like high cash flow, low margin businesses. I'm very curious to see the manner in which (by which I mean the degree to which they will use questionable financial engineering) they use these "business assets" to drive home a favorable financial outcome for the stakeholders.
- crapshoot101 11y agoIts a fair point, but its a little bit more complex than that. For example, EMC's valuation is really dominated by VMWare, of which it owns 80% (indeed, much of the strategic discussion around EMC before Dell emerged had focused on a merger where the parent bought out VMWare or the other way around). VMWare is currently trading ~$33B; Dell could easily take a portion of that stake that EMC owns (say, 25% of that 80%, which would still allow it to maintain majority control) and put that out in the market and generate ~$8B or so (maybe more). Moreover, they could (and probably will) spin off business units that they have less interest in (speculating here, but RSA?). Because EMC has had this traditional federation model, the spinoff / sale of business lines is probably easier than in most areas. No matter what, the debt overhang is still large, but its definitely not as large as it appears at first glance.
- kumarm 11y agoI think existing Shareholders will hold onto VMWare Tracking Stock making the purchase less than 50B.
- CrazyCatDog 11y agoDell has maintained a relatively legit bond rating...this will certainly change things. Their cost of capital will increase, and I'm not quite sure I ne'er stand the strategic value in the acquisition... Why not just partner/jv it?
- deleted 11y ago[deleted]
- vessenes 11y agoI like this play, even if it's 15 years late. Dell had a shot at being AWS and EMC put together in the '90s and 2000s. I think if you're a large-scale commodity hardware integrator, and you look around, you say "We better have a cloud offering right now." Most interesting to me is that you now might have two cloud providers which have a history of total focus on razor-thin margins, competing with a few that don't have that DNA at all. I think Dell could be surprisingly compelling at the cloud game with EMC and VMWare tech in-house.
- dba7dba 11y agoWhile Dell may have had a shot at being AWS and EMC in 90's and 2000's, it never entered into their mindset. They were PROUDLY claiming how they were not wasting money on R&D but rather simply churning out boxes of computers as cheaply as possible using innovations developed by others. But it is good to see a possible competitor to AWS.
- rodgerd 11y ago> They were PROUDLY claiming how they were not wasting money on R&D but rather simply churning out boxes of computers as cheaply as possible using innovations developed by others. Yep. And the downward spiral of companies like HP was chasing them down that path.
- yuhong 11y agoThat is partly because Intel beat them in many of their R&D though.
- dba7dba 11y agoApple? Samsung? Plenty of innovation from non-Intel. Believe it or not one of the early thin/light Dell laptop that sold well was a rebadged Samsung laptop. It was Dell X1 laptop. 2.5lb laptop with 12inch screen in 2005, or even earlier.
- deleted 11y ago[deleted]
- whocanfly 11y agoIt is official now, http://www.dell.com/learn/us/en/uscorp1/secure/dell-emc-transaction http://www.dell.com/learn/us/en/uscorp1/secure/dell-emc-tran...
- deleted 11y ago[deleted]
- ChuckMcM 11y agoGiven Dell's experience with buying LeftHand networks I was surprised when the WSJ indicated they were thinking of doing this. I would have expected someone like NetApp to buy EMC (or perhaps Hitachi) but the enterprise storage business has been banged around lately. When I was at NetApp, EMC were the folks everyone wanted to be, the turn around still amazes me. I guess at the end of the day its hard to be a successful storage company in a world dominated by things like S3.
- whocanfly 11y agoI think EMC handles acquisitions better than many companies. It would have been nice if the acquisition was other way round (hypothetically). It would be awful if Dell messes it up.
- dmourati 11y agoNetApp is faltering by all accounts and their market cap is <$10B.
- ChuckMcM 11y agoI know, and it makes me sad. At one time I was on the short list of CTO replacements (of the internal candidates). It makes me wonder some times about where they would be now if they had gone a different way. My ego would like to believe they would be a power house today :-) but I the storage business has changed a lot since 2006. I can't honestly say I would have negotiated that change any better.
- yaschobob 11y agoI was at EMC for a while too (actually I was at DataDomain which later was bought by EMC) and I feel like there were a lot of storage related startups that chipped away at the best talent that EMC and NetApp had.
- pinewurst 11y agoDell didn't buy LeftHand, HP did and continue to sell it as StoreVirtual. Also Dell was going to buy 3PAR but was outbid by HP, which is why they ended up with Compellent. ex-NetApp, ex-EMC and greatly preferred the latter as an employer even if I miss my net worth at the former.
- kriro 11y agoWhat's the ethical situation for a journalist who leaks this like? How long and hard do you question the agenda of your source? Don't you usually need multiple sources before you publish something like this? I'm not a journalist but am curious how these "insider info that most certainly will influence the deal price" scenarios are generally handled.
- GBond 11y agoIt is often the case a leak is intentional. The Journalist gets their story - leaker get the intended word out with Anonymous Source protection (the "greater" ethic). In this case the motive may be lead time for other bidders to throw their hat in the ring.
- yuhong 11y agoThinking of it, this reminds me of the Twitpic fiasco. The problems need to be fixed.
- devonkim 11y agoI feel the most pain for the former Compellent engineers right now because they're likely going to be the ones getting laid off since they'll directly overlap with EMC's product lines except for the lowest budget stuff that nobody in their right mind should use.
- chocks 11y agoHere's the official press release: http://www.dell.com/learn/us/en/uscorp1/secure/2015-10-12-dell-emc-transaction http://www.dell.com/learn/us/en/uscorp1/secure/2015-10-12-de...
- chocks 11y agoOn a side note: Last year John Chambers the then CEO of Cisco made a prediction about IT consolidation in the future, wonder if this might be first pieces of that puzzle: http://www.businessinsider.com/cisco-ceo-brutal-times-for-it-coming-2014-5 http://www.businessinsider.com/cisco-ceo-brutal-times-for-it...
- zupreme 11y agoThis is definitely not the first. It's been happening in the networking and software spaces for years. Now the trend is moving solidly into the storage realm.
- dang 11y agoUrl changed from http://www.bloomberg.com/news/articles/2015-10-12/dell-said-set-to-reveal-emc-purchase-monday-at-about-33-share http://www.bloomberg.com/news/articles/2015-10-12/dell-said-..., now that the deal is confirmed. We've also rolled back the time decay on this post as a way not to fragment the threads, since submissions about this are coming in by the dozen.
- detroitcoder 11y agoOut of curiosity how often do you tweak the time decay of a given post? Also do some posts have different time decays based on the content (eg. Who's Hiring? vs YC job post vs standard post)?
- dang 11y agoIt's nothing fancy. We just alter an internal timestamp. Yes: job ads have their own time decay algorithm that starts them out at #6 or so and steadily lowers them over about 3 hours. There are other switches that cause some posts (e.g. stories without URLs) to decline faster, but I think they all work on other variables than time.
- samfisher83 11y agoWhy is the stock still trading at 28? It looks like the market doesn't expect the deal to go through?
- crapshoot101 11y agoI think its more that the market is pricing in two things in its probability estimation: 1) The deal won't actually close until next summer. Even if we know for certain that the price is locked in at the numbers specified (due to collars or what not), you're investing at $28 to get $33 while locking up assets for a year, while still being subject to risk of Dell issuing a lot of debt that's going to get more expensive (when the Fed raises rates later this year). Ie, its a nice ~15% yield for 1 year, but its a risky asset. Also, unlike typical cases where a company is in play, this trading price suggests that the market doesn't think an alternate bid (IBM? MSFT? ORCL?) is likely to emerge, or at least not a more substantial one. 2) The structure of the tracking stock is unique, and its not clear if the biggest agitator in EMC (Elliot) is on board with this transaction. My personal bet is that the deal will go through - but the markets are probably pricing in the a) long time frame and b) potential debt exposure from an interest rate rise that may blow it up. For what its worth, in most transactions like this, there's always some gap between the "sale price" and the trading price.
- mcintyre1994 11y agoElliot seem to be on board : http://www.marketwatch.com/story/elliott-management-comments-on-emc-dell-transaction-2015-10-12 http://www.marketwatch.com/story/elliott-management-comments...
- johnymontana 11y agoI'm curious how others think this will impact Spring framework, since Pivotal (sponsors of Spring) is mostly owned by EMC / VMware. What is Dell's OSS record and how does that fit into Dell's business?
- anomnomnom 11y agoAlso wondering about this. Interviewing at Pivotal this week. Should I be reconsidering?
- mattzito 11y agoI think you are so many degrees of separation away that you should be fine. EMC has always been very hands off with VMware, and VMware is relatively hands off with Pivotal. The most possible disruptive outcome is that Pivotal spins out entirely, but I don't see that happening for a while, or even being influenced one way or the other by the Dell/EMC deal. I wouldn't worry about it assuming you've got a timeline for the next 12-24 months.
- anomnomnom 11y agoThanks. That's what I figured. Probably should be more focused on not bombing the interview :)
- tedsuo 11y agoPivotal was spun out. It's a privately owned company with EMC, VMware, and GE as large investors. OSS isn't going away at Pivotal any time soon, it's core to a number of business models. As an aside, Pivotal also heads up Cloud Foundry, which is an open source PaaS that runs on top of every IaaS. We have been good at selling it to large companies (I work at Pivotal). Everyone in this thread is wondering how EMC breaks into cloud computing, but no is mentioning Cloud Foundry. That's currently the tip of the spear.
- xacaxulu 11y agoI believe Pivotal will actually come out of this amazingly. With GE and IBM money fueling Cloud Foundry (an amazing PaaS), I would imagine Pivotal to be the best positioned here.
- markhuge 11y agoTo any EMC employees reading this: Dell is probably going to pay out your vacation balance as cash in a lump sum prior to the merge. Around that time your EMC title will be mapped to something at Dell. There's a pay range associated with the new title that probably won't match your current title. If you're planning on sticking around (and your manager likes you), see if you can work with them to tweak your title before the deal goes through.
- walterbell 11y agoWould such HR changes also apply to subsidiaries like RSA and VMware?
- markhuge 11y agoNo idea. My personal experience with a Dell merger was with a company that had no subsidiaries.