Tuesday, 13 October 2015

Dell to buy EMC in $67 billion record tech deal

Dell to buy EMC in $67 billion record tech deal, aims for cloud market:
Computer-maker Dell Inc struck a deal on Monday to buy data storage company EMC Corp for $67 billion, setting a record in the technology industry, as it tries to transform itself into a giant in the fast-growing market for managing and storing corporate data.

The acquisition, the year's third-largest in all sectors, highlights the frenzy of dealmaking sweeping the economy, as big or mature companies take advantage of low interest rates to buy rivals as a way to spur growth.

The deal should help privately held Dell, the world's No. 3 computer maker, diversify from a stagnant consumer PC market and give it greater scale in the more profitable and faster-growing market for cloud-based data services.


That desire to reach beyond PCs - whose growth has been stopped in its tracks with the rise of mobile devices - echoes moves by Dell's big rivals. Hewlett-Packard Co, the No. 2 PC maker, is splitting off its computer and printer unit this year to focus on the corporate data business. IBM Corp sold its PC unit a decade ago.

By combining Dell's server businesses with EMC's storage and virtualization assets, the new, enlarged company will have a broader range of products to challenge Cisco Systems Inc, IBM and Hewlett-Packard in the areas of cloud computing, mobility and cyber security.

"I don’t think either Dell or EMC were viable over the long run as a standalone; they really needed each other," said Eric Johnson, dean of the Owen Graduate School of Management at Vanderbilt University. "Dell was mostly on the consumer side, which is a terrible place to be. EMC had some enterprise products, but not the complete package."

The deal valued EMC at $33.15 a share as of the end of trading Friday. Dell will pay $24.05 per share in cash and will also give EMC shareholders a special stock that tracks the share price in VMWare Inc, the maker of cloud-based virtualization software majority-owned by EMC.

The stock market gave the deal a lukewarm response. EMC shares rose 1.8 percent to $28.36 after earlier jumping more than 2.5 percent. VMware shares plunged 7.8 percent to $72.48, decreasing the value of Dell's offer.

VMware will remain a publicly traded company. FBR Capital Markets analyst Daniel Ives said shareholders were concerned, however, that VMware would lose talented employees amid uncertainty about their future under Dell, eventually hurting the company's performance.

Read More: REUTERS