Dell, which has faced lagging sales and has gone private in recent years, is in talks to merge with cloud computing and data storage company EMC. Marketplace’s senior tech reporter Molly Wood explains what the massive move would mean for the two companies.
On why this is a big deal:
It’s interesting partly because of the sheer size of the deal. If for example, Dell bought all of EMC, which is valued at $50 billion, it could be potentially the biggest buyout deal ever. But it’s also interesting because it’s Dell, which as you know, took itself private in 2013, and has been quietly getting the heck out of the consumer electronics business and focusing more on building enterprise servers and doing this whole cloud computing thing. So this would be a real turnaround, in some ways, for Dell, if they can do a deal like this and actually reinvent themselves as a company with a totally different mission.
On what Dell would do next:
This is all about cloud computing, which is where a lot of the money is in the tech industry right now. Any company that provides these so-called cloud services … let’s say Apple. That just means they’re storing information on internet-connected computers, making sure the information is secure, and then serving it up on-demand. So you, Apple, you can build a private cloud. Someone like Dell or Microsoft or HP can sell you the computers and some software and services to handle all the actual data. But increasingly, companies want to rent a cloud. Keep all the computing power and the network management and the security stuff, keep that somewhere else, like IBM or Amazon or maybe Dell. See, EMC does data security and also builds software to manage these massive amounts of data, and Dell makes the actual servers, the computers. So they could combine all of those assets, and go to companies and say, “Hey, we are literally offering you a cloud solution in a box, box included.” Plus EMC owns a huge stake in a very profitable company called VMware that can manage data in a way that doesn’t actually involve so many computers. So Dell be less dependent on hardware, too. It just gives them a more complete cloud services business.
On Dell making the biggest leveraged buyout in history:
It’s not like Dell went private and is sitting on a pile of money. It has over $11 billion in debt. CNBC reported today that they would need to borrow another $40 billion. That’s obviously the debt load of a small country. Some analysts think Dell could buy part of the company and spin out that VMware unit as a public entity, which would make the EMC shareholders happy. The possible permutations of the deal are obviously pretty complicated. But sources are apparently telling the Wall Street Journal, the New York Times, CNBC that the talks are pretty advanced, so it could happen soon, or it could all fall apart.
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