Dell Closes $60B Merger with EMC

http://www.wsj.com/articles/dell-closes-60-billion-merger-with-emc-1473252540

by jonbaer • 10 years ago

260 105 10 years ago

chollida12• 10 years ago

The new company services 98% of all fortune 500 companies. That's a pretty incredible reach. And 140,000 employee's. If I were a betting main, I'd expect that number to drop in the very near term.

Selfishly I'm very interested in following a private Dell,as tech tends to lead to huge companies in monopoly/winner take all verticals. Dell being private is a decent case study to see how well a private company does against its public counterparts, specifically wrt short vs long term investment.

If you were wondering how the new company is doing post merger...

Moody's just upgraded Dell's credit rating from Ba2 to Ba1 following the merger. They claim that even though the new entity has significant amounts of debt and leverage, its overall credit profile has been upgraded.

The tracking stock, DVMT, that EMC owners were given has traded pretty well since it was released, it's slightly up, so atleast people who want out of the new entity have an easy avenue.

johansch3• 10 years ago

I'm just fascinated by the fact that in 2016 there are still huge companies like this making their money on ancient tech that is insanely overpriced to the alternatives.

(~20 years ago when I started working in software I thought I would eventually get how these enterprise software giants actually were worth it. The more I learn and age...)

In the end I guess what companies like Dell and EMC do is to provide access to tech that otherwise (because of cultural reasons) is not available to non-tech companies. But.. anyway, all of this seems like it's ripe for disruption.

wslh2• 10 years ago

I'm just fascinated by the fact that in 2016 there are still huge companies like this making their money on ancient tech that is insanely overpriced to the alternatives.

It is basically about switching costs. Even if you have the money you don't want to disrupt your operations because IT is doing a monster migration to different technologies.

tw04• 10 years ago

I've heard the "insanely overpriced" comment before - compared to what? The open source/cheaper alternatives tend to be, bluntly, a joke when it comes to the data storage market. They all either have glaring availability or feature gaps that people who champion them try to paint as "not a big deal". It's not a big deal until your fortune 500 relies on it.

kbenson3• 10 years ago

In some cases it's because stability and repeatability are more important in many aspects. At the level where enterprises are buying components to interface directly with people on a regular basis (e.g. workstations), having a slightly more powerful workstation (20%) generally does not compute into a person that is 20% more productive, but having a workstation that fails to function 20% of the time can definitely lead to a near 20% loss in productivity. Large enterprise providers leverage knowledge of failure rates over vast quantities of almost identical (comparatively very variances, at least) computers to ruthlessly identify any weak links in all parts of the computer, because their service contracts often make them responsible for these problems. This goes as far as creating their own mainboards and BIOS, RAID firmware, etc. Enterprises take advantage of this for both their initial good stability rate and ease of replacement when there are problems.

To put this in another perspective, the vast majority of people buy factory model cars, maybe with the occasional dealer add-on. People could buy custom made cars, and if it was common enough, they might actually achieve a cost lower than MSRP of what Ford, Honda, Toyota, etc sell, by slapping together the freely available parts (from an industry which would look more like the PC parts industry). The average quality would be a big question though, and I'm not sure a lot of people would be willing to deal with that for their workhorse vehicles, that need to be relied on to get them from point A to point B reliably.

tracker14• 10 years ago

It comes down to fixed resources and reducing operational costs. Yes, you could write your own iSCSI driver, running against a large distributed drive system, or other interfaces, but people don't. There's also a significant cost difference in manufacturing a run of 10k system boards vs 1M of them. Tooling alone is very expensive, and retooling more so.

EMC in particular is fairly custom hardware and software and still tends to deliver better value and consistency than the competition. EMC offers NAS options that has always been ahead of its' competitors. I say this as a passive observer as I've been in software development more than anything operational for the better part of two decades, but I remember in the mid-late 90's that what EMC offered simply had no competition at that time.

Today, it's entirely possible to build a software system similar to what S3 does in-house, but that isn't always what a given system/application, especially legacy systems, require. Not to mention a black box that's mostly closed vs needing specialized software management in-house. There are operational costs to this.

Using a single EMC device vs. hiring 3-5 FTEs making > 80k (120-150K after employer-side taxes) for 5+ years? That's a few million right there. This is often the trade off that EMC offers.

Dell itself offers consistency in broader terms... the same/compatible hardware across all employees... all the same docking stations, all the same monitors, etc. There's value in that as well.

biztos2• 10 years ago

If I have a business making $100M per day using "ancient tech" that costs me, say, $100M per year, I might be interested in switching to the Lambdarific Supracloud, but my interest level will depend a lot more on the risk of failure than on any price difference.

valarauca12• 10 years ago

Dell makes most it's money providing enterprise volume orders of desktops/laptop computers, repair parts, and certifying+insuring people to work on these computers.

EMC also contractually guarantees data integrity with some of it's higher end products/contracts. As does IBM/HP/Oracle. All your FOSS tools don't offer this, so your company has to shoulder this responsibility yourself.

Underwriting insurance on multi-million dollar contracts isn't something you can just disrupt unless you already have the funds necessary to burn all the way though series B laying around on your person. In which case, isn't their an easier idea to execute?

rsync• 10 years ago

"I'm just fascinated by the fact that in 2016 there are still huge companies like this making their money on ancient tech that is insanely overpriced to the alternatives."

You're not wrong.

The problem with your point of view (which I share - it is also my point of view) is that you're operating on the wrong layer of abstraction.

These customers don't need a server (or a network or a SAN) - they need business objectives to be met - again, at a very highly abstracted layer.

You're thinking about technology and capabilities and features and configuration options ... and maybe you're even thinking about price ... but that's not the layer they are operating at. They need an airplane to be built. They need a mine to be dug. They don't care about LUNs or stripe sizes or jumbo frames. They do care about contracts and legal commitments and "synergy". And that's why they rely on heuristics like business lunches and enterpris-ey sales guys and CIA guys giving keynotes at RSA.

I don't like working at that layer of abstraction so I built a business that operates on the layer I like to work at.[1] But as much as I dislike the higher layers of abstraction, it would be childish of me to think they were "wrong".

[1] You know who we are.

2close4comfort3• 10 years ago

It is solid state will be the first place that EMC has faltered. And it has NOTHING to offer. XtremIO doesn't count because it is going to be deprecated soon and still is not a part of vBlock so its future is sketchy.

khedoros• 10 years ago

If someone buys a big EMC system, they aren't just paying for hardware and software. They're paying for EMC to also integrate it into their other systems, set it up, train them to manage it, provide custom coding if their environment requires some unusual change, give early access to fixes for problems they experience, etc. There's a support contract with SLA. There's free overnight shipping of components, and field techs that'll fix the hardware for the customer.

Can someone else do it for cheaper? Maybe. Probably. But to a large degree, it's a "no one ever got fired for buying IBM" situation that you'd be fighting against.

scholia• 10 years ago

Most of the Fortune 500 still use IBM mainframes, which are still the children of the S/360 launched in 1964.

The interesting questions include: how long does it take to move off them; how reliable is the move; and what happens to your quarterly results doing a multi-year transition?

Another one is: How long is the current CEO going to stick around to manage the process?

gwbas1c2• 10 years ago

Syncplicity basically lets companies have a Dropbox-like product that's run on EMC hardware inside of a company's data center. There's a clear migration path to a 100% hosted solution when a company is ready to let go.

You'd be surprised how many companies consider it in their best interest to run their own servers.

ArkyBeagle3• 10 years ago

It's probably not ripe for disruption. There's too much furniture to move. And "ancient tech" lives forever because it's a solved problem - one need only develop replacement parts as they go obsolete.

Until you've "done what they asked for" and then have 'em be completely unprepared for the ripple effect, it's hard to explain the phenomenon. The status quo, especially in a low interest rate economy, is a really Big Thing.

B1FF_PSUVM• 10 years ago

services 98% of all fortune 500 companies.

So it's a short list of ten for the other 2%. IBM, HP, ... ??

(Clarification: the ten who don't buy from Dell+EMC. Just curious about that. Direct competitors is my first guess ...)

tboughen• 10 years ago

No, because large companies buy computing goods and services from more than one business. There will be significant overlap.

icelancer• 10 years ago

AAPL.

codemac• 10 years ago

They service those companies as well. Most of the fortune 500 don't buy one server or one storage system. They buy many of everything, and reward the best vendors with larger portions of their data centers, not exclusivity.

rodgerd2• 10 years ago

It wouldn't be uncommon for a Fortune 500 to have no Dell or EMC.

It would be a very unusual Fortune 500 that has no VMWare.

flukus• 10 years ago

IBM is primarily a services company aren't they?

keypusher• 10 years ago

HDS (Hitachi Data Systems). Average guy on the street may never have heard of them, but they sell a ton of storage to Fortune 500.

kchoudhu• 10 years ago

The new company services 98% of all fortune 500 companies.

How is this not an antitrust issue?

d4rti• 10 years ago

I think that servicing 98% is not the same as 98% market share, and that anti-trust cares about market share. All it means is that 490/500 companies bought at least one Dell/EMC product. I'd assume most also bought at least one IBM/HP product too.

tracker14• 10 years ago

They're not necessarily the only company those 98% use... I'd guess that Dell is already a supplier for at least nearly that high of a percent in some regard.

In the end though, just because you have a near monopoly doesn't mean you're violating anti-trust. EMC already had that reach, even without dell.

TallGuyShort• 10 years ago

Dominating the market is not illegal - anti-competitive behavior is. The former is still possible just by being really good at what you do and how you sell.

loeg7• 10 years ago

The tracking stock, DVMT, that EMC owners were given has traded pretty well since it was released, it's slightly up, so atleast people who want out of the new entity have an easy avenue.

It's trading at a 35% discount from VMW, which is pretty steep.

chollida12• 10 years ago

It's trading at a 35% discount from VMW, which is pretty steep.

Sure is, but keep a few things in mind..

1) This is the first time tracking stock has been issued on a public company so there are alot of people out there who aren't really sure what to make of this class instrument yet.

2) You'd expect a steep discount due to liquidity and lack of typical share holder rights. For example, if VMWare did pay a dividend, then the tracking stock would not necessarily have to pay that out to unit holders.

3) EMC paid a dividend. There are alot of funds that bought EMC to get the dividend. They've been forced to sell the tracking stock as VMWare doesn't pay a dividend and the tracking stock won't pay one.

univalent• 10 years ago

I tried to buy DVMT and couldn't get any.

2close4comfort3• 10 years ago

The real opening EMC has is now being able to sell directly, effectively cutting out the Partner channel which EMC has cultivated over the years and which is why it costs so much by the time you am me go to buy storage. This is where that credit will come in handy. But really how many companies have DIED after being acquired by Dell, Compellent, Sonicwall, Quest SW, and now VMware/EMC. This is where things go to die and I hope very much for VMware's sake that this is not the case but history is not in their favor.

chris_wot• 10 years ago

God, so correct. If you are an employee of a company that gets acquired by EMC, consider finding another job!

paulv• 10 years ago

What's remaining of Quest/Sonicwall/Dell Software was sold a few months ago.

pinewurst• 10 years ago

This is a very ignorant statement on a variety of levels. The cost of storage sales is high enough that the likes of EMC, HPE and NetApp fight for channel partners to offload their sales of anything but the largest deals. Acquisitions admittedly seldom go well, but EMC doesn't have a bad record, considering.

jasonjei• 10 years ago

Dell tried to get into the cloud services market a long time ago, and didn't succeed. VMware is a weird case too, especially with containerization and cloud service vendors being cheaper to use than building your own cloud. If Dell is trying to make their own cloud, I wonder if they'll succeed this time. Some people have said that ship has sailed for them. Then again, a company like Google has made a compelling competitor to AWS.

petra• 10 years ago

Maybe the idea is to get into the private cloud business, in hope that it will grow ?

pm90• 10 years ago

Exactly. AFAIK Amazon is the only company that has a profitable public cloud atm. Dell/EMC are mostly B2B companies and setting up and managing private clouds is the next gold mine.

tracker14• 10 years ago

My hope is they'll actually put some resources into bringing VMWare current, and more open as an option, closer to how they were a few years back. ESXi is still a pretty nice server, but running a local/free version instance has become difficult with a few pitfalls if you do the wrong things somewhere... You're all but stuck with windows-only mgt software instead of a web-management interface.

I'd like to see dell go closer to the Redhat model when it comes to VMWare after this closes out. Which would be a stark contrast to prior efforts. Also of interest would be offering "private cloud" hardware/software options. Would be very cool to have a turn-key solution for self-cloud hosting, and with VMWare's work so far, they might be in a better position to actually integrate docker as a solution than others, despite being different than their prior efforts.

newman314• 10 years ago

If you are running the latest versions of ESXi, you might be interested in this.

https://labs.vmware.com/flings/esxi-embedded-host-client

Without going into more detail, VMware recognizes that Flash is a dead end and is working on converting things to HTML5. I'm fairly happy with the direction they are heading towards from a UI standpoint although I still mostly do things via CLI.

To your other points, you might want to check out Cloud Foundation.

Disclaimer: not a VMware employee, just a customer.

parasubvert5• 10 years ago

VMware Photon is trying to focus on the latter, though you can get pretty close to a "private cloud in a box" today via EMC/VMware with this: http://virtualgeek.typepad.com/virtual_geek/2016/08/vmworld-...

caveat lector, I work for Pivotal.

throwthisaway00• 10 years ago

Dell will fail because of a systemic problem of hiring poorly skilled and educated engineers. An analogy to cancerous cells in the body multiplying and spreading is not such a stretch. Dell needs a very invasive treatment to eradicate gobs and gobs of worthless engineers and do-nothing mid-level management.

jhall1468• 10 years ago

Now that the merger is complete a purge is inevitable. Whether or not they get rid of the correct employees remains to be seen.

signa11• 10 years ago

Whether or not they get rid of the correct employees remains to be seen

does that ever happen ?

biztos2• 10 years ago

I know some really smart and very ambitious people who went to work for EMC over the last few years. Just as a wild guess, I bet there's huge money being made there and very fat bonuses to the people who are seen as delivering it.

Hope the Delliverse works out for them.

loeg7• 10 years ago

Very modest bonus in the trenches. RSUs granted before October 2015 vest early (today). You could buy a nice new car, but not a yacht. (I couldn't buy a Model S with my buyout bump, for example, although I'm sure some others are seeing bigger bonuses.)

89vision• 10 years ago

Funny, I just got back from an interview with EMC. Would now be a good time to take a position?

JTon• 10 years ago

I would guess it depends if the position you're filling is made redundant by the merger.

jdpedrie2• 10 years ago

My dad works for EMC, and he's fairly bullish on the whole situation.

xadhominemx• 10 years ago

Why is that? Feels like AWS and Azure are bad for pretty much every aspect of their business. Genuinely curious.

gwbas1c2• 10 years ago

Depends on what the job is. EMC pays good benefits for boring jobs. Assume that "good benefits for boring jobs" won't change any time soon.

EMC will also slash out departments and products that don't perform. Make sure that whatever department / product you're going to work in is doing well.

loeg7• 10 years ago

If it sounds like something you'd enjoy and the pay is right, I don't see any reason not to.

shmerl• 10 years ago

So Dell owns VMware now?

Mac2125• 10 years ago

Yes, but keeping it as its own entity.

donretag2• 10 years ago

And VMWare owns SpringSource. So basically the Spring framework is owned by Dell.

oDot• 10 years ago

Now that this is done they go on and make a ~1.3-1.5kg XPS 15 with a 4K screen that lasts > 9 hours.

Please.

2trill2spill• 10 years ago

I hope Dell does not screw up EMC Isilon, because Isilon is a big contributor to the FreeBSD project and it would suck to lose their contributions. The link below shows the over 3,000 commits they have made to the FreeBSD project over the years.

https://secure.freshbsd.org/search?project=freebsd&q=emc

afraidknot• 10 years ago

Not quite on the same scale, but they do care - https://secure.freshbsd.org/search?project=freebsd&q=dell

internal_tools• 10 years ago

The Dell-EMC merger itself is fascinating, but really stands above it is all the other company's that EMC owns: VMWare, Spring, Pivotal, RSA Security, and a whole stable of backup/recovery companies.

All of these have deep inroads in the enterprise and really makes working on Dell-owned products opaque to the user. It's like Dell has become, or will soon become, the Koch Industries of the computing world.

ArkyBeagle3• 10 years ago

While I agree with the DOJ decision on the Halliburton-Baker Hughes acq. ( even though it may have cost me a job ( but probably not - they were headed full-on Luddite well before ) ) it's really interesting that the same logic does not apply when it's explicitly technology.

I wouldn't wish Dell on anyone - although they've done what's necessary to be the leader.

rosstex• 10 years ago

This good be a great break for competitors like Pure Storage, Nimble, etc.

unixhero• 10 years ago

Whoa

matthewhall• 10 years ago

This took so long... they announced this in like 2013

parasubvert5• 10 years ago

more like October 2015: under a year.

walrus01• 10 years ago

You, too, need a $200,000 SAN with software licensing costs, even if you don't know it yet! Even if you're a small business that would be served well by two machines with mdadm raid6 and Linux drbd.

janeFondler• 10 years ago

Is it going to help them make better computers?

smartbit• 10 years ago

Nice comment by Trevor Pott http://www.theregister.co.uk/2016/09/07/my_dell_merger_wish_...

More precisely, they didn't understand their own irrelevance.
EMC's brass – along with that of many other tech companies – believed in a sort of manifest destiny. Their corporate largesse and sheer market share meant that they could dictate terms to customers. They believed, seemingly honestly, that this would persist.

...

To this end, my wish list for EMC II revolves around R&D. Dell: please let EMC II experiment. Let them try new things. Above all let them fail.

Archive link http://archive.is/tYQy7

Dell Closes $60B Merger with EMC

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