EMC data storage and information security giant eyes Dell and Hewlett-Packard to sell of share in VMware.
EMC is not just looking for a company to sell off its share in VMware; it is actually eyeing for a “merger of equals” with complementary companies which including Dell and Hewlett-Packard. Technology experts say that if such a deal happens, it will reshape the technology landscape and possibly lead to disruptions in the channel.
EMC is under pressure resulting in the actions of Elliott Management to return more value to its shareholders. This pressure has resulted in the company reportedly shopping for a merger for its 80 percent stake in VMware to other companies.
It was a financial headline in the past few days that EMC, which has an estimated value of $60 billion, has been thinking of the potential of merging with similar-sized and complementary companies. These companies are HP and Dell. The intent was said to create a company with greater technology capabilities than the sum of any two parties’ respective parts.
However none of the companies involved, including HP and EMC are commenting officially despite actual updates of talks and between the two companies. According to published reports, the said merger would be an all-stock trade. In this merger the shareholders of the respective sides would receive corresponding shares of the two companies equal to the deal’s valuation. But reports actually say that talks between HP and EMC broke down due to a failure to reach an acceptable price.
A cross between HP and EMC would be a technology that generates more than $130 billion a year. Reports also say that it will hold a market valuation of nearly $100 billion. HP is by far the largest server vendor in the world and is considered as the second-largest network gear vendor. But despite significant storage assets, it is behind rivals EMC, NetApp, and Dell. Therefore a merger would create a massive infrastructure company which will be strengthened by VMware’s market-leading virtualization portfolio. HP could also gain significant security assets, as EMC owns RSA Security. RSA is the leader in encryption, authentication, and identity management solutions. These amazing technologies would definitely improve and complement HP’s existing firewall, intrusion prevention, and security information management tools.
EMC and Dell would create a new storage powerhouse. This is combining Dell’s EqualLogic and Compellent assets with EMC’s deep storage portfolio. Dell is a leader in servers, which would definitely enrich EMC’s storage offerings. And Dell has significant storage assets that will benefit a lot with the addition of RSA.
Dell or HP plus EMC will significantly affect the industry and cause significant portfolio and channel disruptions. And of course merging two large companies will take a long time and tremendous resources. Joining of products, operations, and channel programs will cause significant disruptions in the channel. Some acquisitions could even take two or more years to translate into channel consolidation. Experts also point out that the channel is replete with examples of how the channel consolidation process alienates partners, causes sales attrition because of a customer base that doesn’t want to follow the merger. The results are potential lost products and incentives.
But of course, given the nature of the merger reports, it may be too early to tell if the talks will indeed materialize into a merger. But the potential of an EMC merger with a rival speaks volumes about the shifting market dynamics and the necessity of consolidating technologies, costs, supply chains, and channels. If EMC does merge with a similar-sized company, the merger could cause mega-mergers in the technology industry, and this will ripple through the channel.
EMC Corporation is an American multinational corporation with headquarters in Hopkinton, Massachusetts, United States.EMC provides data storage, information security, virtualization, analytics, cloud computing and other products and services. These enables businesses to store, manage, protect, and analyze data. EMC’s target markets include large companies and small- and medium-sized businesses across various vertical markets. The company has 60,000 employees and is considered the world’s largest provider of data storage systems competing against NetApp, IBM, Hewlett-Packard, and Hitachi Data Systems. EMC stock market evolution:
About Hewlett- Packard
Hewlett-Packard Company or HP is an American multinational information technology corporation with headquarters in Palo Alto, California, United States. It develops hardware, software and services to consumers, small- and medium-sized businesses and large enterprises, including customers in the government, health and education sectors. HP stock market evolution:
Dell Inc. is an American privately owned multinational computer technology company headquartered in Round Rock, Texas, United States. Dell develops, sells, repairs and supports computers and related products and services. The company is one of the largest technological corporations in the world, employing more than 103,300 people worldwide. Dell also sells personal computers, servers, data storage devices, network switches, software, computer peripherals, HDTVs, cameras, printers, MP3 players and also electronics built by other manufacturers.