Dell laptop

image courtesy of Dell

Dell to Buy Data & Cloud Firm EMC

| published October 12, 2015 |

By Thursday Review staff

Computer giant Dell announced on Monday that it is purchasing data storage and cloud computing firm EMC Corporation in a massive $67.2 billion merger, one of the largest of its kind.

Dell is one of the world’s biggest manufacturers of desktop computers, laptops, and servers in the world; EMC is one of the largest data storage and cloud storage operations in the world. If the deal passes muster with regulators in the United States and other countries, it would jumpstart Dell’s somewhat stagnant business model, and allow Dell to assert itself into the rapidly-growing business of cloud computing, virtualization, data storage, and computer business applications.

The merger is a friendly buyout: EMC board members unanimously approved the deal, and voted to urge shareholders to agree to the business marriage. Dell’s offer is considered more than generous. By bidding high for EMC, Dell also sidelined talk by other potential buyers of EMC’s valuable assets and skills, including IBM, Cisco and Hewlett-Packard—all of whom had been discussed as partners.

Like other laptop and desktop computer makers, Dell has seen sales generally flatten in the last two years as more online and computing activity migrates into the arena of smaller handheld devices. Likewise, EMC’s cloud computing and virtualization skills were relatively landlocked without the participation of a major maker of computers. For that reason, many business and technology analysts see the merger as highly advantageous to both companies and a major strategic victory for Dell.

Despite the extremely positive spin by both companies on the merger, the proposal includes a clause—commonly called a “Go Shop” provision—which will give EMC shareholders and officers 60 days to shop around for a better offer. Most Wall Street analysts see that as a friendly formality, since Dell’s offer is generous enough to scare off bids from competitors like IBM and Oracle.

Part of the cash for the deal will be financed from within, by Dell owner and founder Michael Dell, and from several equity investors, including principal investor Silver Lake Partners.

Dell was founded in 1984 and is based in Round Rock, Texas. Dell’s current subsidiaries include Perot Systems, Alienware, Sonic Wall, and Force 10.

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