Dell/EMC reshapes IT landscape, but what happens next?
- 13 October, 2015 09:45
Dell’s announced acquisition of EMC looks good on paper but presents multiple integration challenges, according to Andrew Neff, Gartner Research VP and Invest analyst.
Dell/EMC is moving to fill in gaps but with unclear benefits for customers. HP, IBM, CSCO, ORCL are possible other bidders for EMC and NTAP may also face choices, he states.
Following several days of increasingly detailed rumours, Dell has announced a US$65 billion acquisition of EMC.
Under the terms, Dell will pay both cash and a tracking stock tied to VMware which is 80 per cent controlled by EMC and which will remain a standalone public company. As part of the agreement, EMC has a 60-day “go shop” period in which it can seek/consider other offers.
While Dell has apparently performed fine since going private, it does not have a history of integrating major acquisitions.
From a strategic standpoint, Dell/EMC represents a clear different way in IT hardware, given that EMC’s Federation of EMC and VMW and – now – Dell runs counter to what other players are doing, says Neff.
In contrast, HPQ is days away from splitting into a printer/PC company and enterprise IT company and IBM has left the PC business and then x86 servers.
Oracle, in contrast, has remained software-centric despite its acquisition of Sun Microsystems in 2009, while Cisco has entered the x86 server business but chosen generally to partner with storage vendors. Lenovo acquired IBM’s x86 server business in 2014 to add to its PC and mobile phone businesses, but early returns are mixed.
He says a positive development of this acquisition of the leading storage vendor – scheduled to close between May and October 2016 – is that it strengthens Dell’s position as a vendor to the enterprise where it is ranked second in x86 servers, but sixth in storage.
“Importantly, EMC brings with it leadership in high-end storage, solid state arrays, integrated systems as well as VMware’s software define networking,” he states.
“Moreover, the combined companies would have a higher profile as a vendor of cloud products and services and as software vendor (where the combined EMC/Dell would be ranked fifth in worldwide software revenues).
As for challenges, he states while Dell has apparently performed fine since going private, it does not have a history of integrating major acquisitions. Its biggest acquisition to date was Perot Systems for US$3.9 billion in 2009 which was marred by flawed integration.
Moreover, there is a high level of overlap of Dell’s storage products with EMC.
While the timing may have been a surprise, EMC has been considering strategic options for some time and reportedly has had talks with multiple players, he points out. “EMC may have felt a sense of urgency owing to multiple disruptive forces in the storage business.”
Neff cites the enterprise storage market faces three concurrent challenges: New technologies such as solid state arrays and cloud storage; increasing customer power from hyperscale customers; and software increasingly replacing hardware.
He concludes: “EMC has many strengths but its marketing skills are a big qualitative asset although there are obvious questions regarding cultural fit.”
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