Dell buys EMC: the biggest tech acquisition in history?

By Madhvi Mavadiya | 13 October 2015

Hailed as the largest tech acquisition in history, Dell has announced the purchase of digital storage behemoth EMC for $67 billion which has caused the company’s shares to increase and is expected to transform the consumer PC industry.

Dell is now a company that is not publicly traded, after CEO Michael Dell removed the organisation from the public sphere for $25 billion in 2013 to avoid investors who wanted to overthrow the original executives of the company, which included activist investor Carl Icahn, the Guardian reported.

The Guardian also explained that EMC is renowned for being a leader in selling and making software for computer storage systems but in recent times, their business has seen some decline due to many organisations preferring cloud computing solutions. However, EMC owns a large share in the widely used virtual cloud computing company VMware that has a market cap of $33 billion alone.

Vice president research director for market analysts Forrester Research, Glenn O’Donnell, believes that this acquisition makes sense for the future, but how funds will be recovered in the present will be questioned. “They’ll be getting an absolutely enormous cash flow stream with EMC. The core cash flow stream is declining but it’s still huge. That’s a really bad thing for a publicly traded company, but it’s a darn good thing for a private one,” O’Donnell said.

O’Donnell also believes that VMware is what makes this acquisition significant because of the extent of the profit that will be gained. Alongside this, CEO of EMC, Joe Tucci says that after a lot of work, this is the best future for the business, the Guardian reported. “I believe that this transaction will put EMC and our terrific people in the best position possible to thrive in the new world order,” Tucci wrote in the EMC blog.

Other news in the tech world revealed that HP would be splitting into two separate companies, but remained confident that they would retain their position at the top. “This is a real opportunity for HP. Two of our largest competitors are attempting a highly distracting, multi-year merger, just as we are launching two new, focused companies. The massive debt burden Dell and EMC are taking on undoubtedly means that they will have to radically reduce R&D, and integration inevitably will create disruption as they rationalise product portfolios, channel programs, and leadership,” a representative from HP said in a statement.

Some are sceptical about this acquisition because it has taken place so soon after Dell decided to go private and The New York Times reports that net income and cash flow from operations have been decreasing in recent years. The article also maintained a similar attitude to the HP spokesperson. “In theory, Dell’s lacklustre performance increases the risks associated with acquiring EMC. If merging with EMC causes big disruptions and distractions, it could weigh on both Dell and EMC in the coming years,” the New York Times said.

As Michael Dell announced the buyout, he reiterated that staying private was a good decision. “There’s nothing wrong with being public or private – but we have the resources to stay private,” Dell said. 

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