
Dell to Buy EMC in Deal Worth About $67B - necubi
http://www.bloomberg.com/news/articles/2015-10-12/dell-to-acquire-emc-for-67-billion-to-add-data-storage-devices
======
markhuge
To any EMC employees reading this: Dell is probably going to pay out your
vacation balance as cash in a lump sum prior to the merge. Around that time
your EMC title will be mapped to something at Dell. There's a pay range
associated with the new title that probably won't match your current title.

If you're planning on sticking around (and your manager likes you), see if you
can work with them to tweak your title before the deal goes through.

~~~
walterbell
Would such HR changes also apply to subsidiaries like RSA and VMware?

~~~
markhuge
No idea. My personal experience with a Dell merger was with a company that had
no subsidiaries.

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hkmurakami
So numbers from the article: Dell went private in 2013, valuing itself at
$23B. EMC has a market cap of $53.6B (Dell would have to pay some sort of
premium on this). Dell is raising $40B in debt to finance the purchase.

Let's say Dell pays a 20% premium on EMC and buys it for ~$65B. Let's also say
that Dell's market cap has increased somewhat since 2013, since the market has
generally been a bull market. Let's say that their $25B valuation is now $30B.

So the companies combined have a valuation of $95B, with $40B in debt. They
both seem like high cash flow, low margin businesses. I'm very curious to see
the manner in which (by which I mean the degree to which they will use
questionable financial engineering) they use these "business assets" to drive
home a favorable financial outcome for the stakeholders.

~~~
CrazyCatDog
Dell has maintained a relatively legit bond rating...this will certainly
change things. Their cost of capital will increase, and I'm not quite sure I
ne'er stand the strategic value in the acquisition... Why not just partner/jv
it?

~~~
einrealist
Maybe, they will transform from a hardware to a cloud infrastructure company.
Because many companies are moving applications into the cloud and buying less
servers or or just avoid or give up on custom data centers at all. VMWare may
be the key.

~~~
CrazyCatDog
Folks,

We are not yet in a world where cloud > local for the top 45% of Dell's _most
profitable customers_ (think big, very big). And if we ever get there, I don't
think they will be looking to Dell/VM for a solution.

Those "whales" are going to want a more integrated solution, so Amazon,
Google, and Msft will take their cloud services one step further--further away
than Dell/VM will ever be able to take it: dedicated fiber for their largest
customers. How? Any of these three can lour their existing client base as bait
and cut a deal with the Verizon and ATTs of the world for bulk (dedicated)
bandwidth purchases. And if they don't have enough existing clients (Azure)
they can post a cash-bond guaranteeing revenues to the telecom (just like msft
did with the record companies to sell music in Win8).

At any rate, when your borrowing cost is exponential, and you have no cloud
business to speak of, you won't be able to take your services to that next
level. I may end up eating my words here, but this is too little too late for
Dell--the beginning of the end if you will.

This is not financial engineering, but rather Silverlake and EMC denying
reality, or at least postponing it until they can each cash out.

~~~
koko775
> We are not yet in a world where cloud > local for the top 45% of Dell's most
> profitable customers (think big, very big). And if we ever get there, I
> don't think they will be looking to Dell/VM for a solution.

> Those "whales" are going to want a more integrated solution, so Amazon,
> Google, and Msft will take their cloud services one step further--further
> away than Dell/VM will ever be able to take it: dedicated fiber for their
> largest customers. How? Any of these three can lour their existing client
> base as bait and cut a deal with the Verizon and ATTs of the world for bulk
> (dedicated) bandwidth purchases. And if they don't have enough existing
> clients (Azure) they can post a cash-bond guaranteeing revenues to the
> telecom (just like msft did with the record companies to sell music in
> Win8).

You're kidding, right? Dell has _provided_ the solutions for two of those
three companies. The datacenter segment of their business is both successful
and demolishing its only real competitor: a crumbling HP.

Dell's able to build and deliver ridiculously energy efficient datacenters at
scale, very quickly. And they do, for Microsoft, eBay, and a number of other
companies.

Their competitive advantage on the hardware side is substantial. Controlling
VMWare would catapult the software side of things very, very far forward. If
they want to build a new cloud platform, they've got extremely strong
fundamentals to launch it from. If not, well, they'll probably power whoever
does build it in some way (and profit handsomely).

------
dang
Url changed from [http://www.bloomberg.com/news/articles/2015-10-12/dell-
said-...](http://www.bloomberg.com/news/articles/2015-10-12/dell-said-set-to-
reveal-emc-purchase-monday-at-about-33-share), now that the deal is confirmed.

We've also rolled back the time decay on this post as a way not to fragment
the threads, since submissions about this are coming in by the dozen.

~~~
detroitcoder
Out of curiosity how often do you tweak the time decay of a given post? Also
do some posts have different time decays based on the content (eg. Who's
Hiring? vs YC job post vs standard post)?

~~~
dang
It's nothing fancy. We just alter an internal timestamp.

Yes: job ads have their own time decay algorithm that starts them out at #6 or
so and steadily lowers them over about 3 hours. There are other switches that
cause some posts (e.g. stories without URLs) to decline faster, but I think
they all work on other variables than time.

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vessenes
I like this play, even if it's 15 years late. Dell had a shot at being AWS and
EMC put together in the '90s and 2000s.

I think if you're a large-scale commodity hardware integrator, and you look
around, you say "We better have a cloud offering right now."

Most interesting to me is that you now might have two cloud providers which
have a history of total focus on razor-thin margins, competing with a few that
don't have that DNA at all. I think Dell could be surprisingly compelling at
the cloud game with EMC and VMWare tech in-house.

~~~
dba7dba
While Dell may have had a shot at being AWS and EMC in 90's and 2000's, it
never entered into their mindset. They were PROUDLY claiming how they were not
wasting money on R&D but rather simply churning out boxes of computers as
cheaply as possible using innovations developed by others.

But it is good to see a possible competitor to AWS.

~~~
rodgerd
> They were PROUDLY claiming how they were not wasting money on R&D but rather
> simply churning out boxes of computers as cheaply as possible using
> innovations developed by others.

Yep. And the downward spiral of companies like HP was chasing them down that
path.

~~~
yuhong
That is partly because Intel beat them in many of their R&D though.

~~~
dba7dba
Apple? Samsung? Plenty of innovation from non-Intel.

Believe it or not one of the early thin/light Dell laptop that sold well was a
rebadged Samsung laptop. It was Dell X1 laptop. 2.5lb laptop with 12inch
screen in 2005, or even earlier.

~~~
yuhong
I was thinking of the workstation/server market, though HP did have their
Vectras back in the 1990s.

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whocanfly
It is official now, [http://www.dell.com/learn/us/en/uscorp1/secure/dell-emc-
tran...](http://www.dell.com/learn/us/en/uscorp1/secure/dell-emc-transaction)

------
johnymontana
I'm curious how others think this will impact Spring framework, since Pivotal
(sponsors of Spring) is mostly owned by EMC / VMware. What is Dell's OSS
record and how does that fit into Dell's business?

~~~
anomnomnom
Also wondering about this. Interviewing at Pivotal this week. Should I be
reconsidering?

~~~
mattzito
I think you are so many degrees of separation away that you should be fine.
EMC has always been very hands off with VMware, and VMware is relatively hands
off with Pivotal.

The most possible disruptive outcome is that Pivotal spins out entirely, but I
don't see that happening for a while, or even being influenced one way or the
other by the Dell/EMC deal.

I wouldn't worry about it assuming you've got a timeline for the next 12-24
months.

~~~
tedsuo
Pivotal was spun out. It's a privately owned company with EMC, VMware, and GE
as large investors. OSS isn't going away at Pivotal any time soon, it's core
to a number of business models.

As an aside, Pivotal also heads up Cloud Foundry, which is an open source PaaS
that runs on top of every IaaS. We have been good at selling it to large
companies (I work at Pivotal). Everyone in this thread is wondering how EMC
breaks into cloud computing, but no is mentioning Cloud Foundry. That's
currently the tip of the spear.

------
ChuckMcM
Given Dell's experience with buying LeftHand networks I was surprised when the
WSJ indicated they were thinking of doing this. I would have expected someone
like NetApp to buy EMC (or perhaps Hitachi) but the enterprise storage
business has been banged around lately. When I was at NetApp, EMC were the
folks everyone wanted to be, the turn around still amazes me.

I guess at the end of the day its hard to be a successful storage company in a
world dominated by things like S3.

~~~
pinewurst
Dell didn't buy LeftHand, HP did and continue to sell it as StoreVirtual. Also
Dell was going to buy 3PAR but was outbid by HP, which is why they ended up
with Compellent.

ex-NetApp, ex-EMC and greatly preferred the latter as an employer even if I
miss my net worth at the former.

~~~
ChuckMcM
Your right, I was confusing them with EqualLogic (I went back and read this
page
[https://en.wikipedia.org/wiki/List_of_Dell_ownership_activit...](https://en.wikipedia.org/wiki/List_of_Dell_ownership_activities))
to figure out what I must have been thinking about.

Thanks for the correction.

------
selimthegrim
So, how much more vulnerable does this make HP with its upcoming split?

~~~
aaronbrethorst
Meh, EMC has been a part of the walking dead for years. There were rumors a
few months ago that VMware— _a spinoff from EMC_ —was going to acquire EMC.

Dell doesn't care. They've been private for a couple years. No one's going to
pummel their stock tomorrow morning.

Anyway, HP has much more to fear from HP than they do from the synergistic
effects (lol) of Dell+EMC. HP is a total disaster, and is far more likely to
kill itself off than die from consolidation around it.

~~~
kbuck
Small correction: VMware isn't a spinoff of EMC, it's a subsidiary. VMware was
originally founded in 1998 and acquired by EMC in 2004.

~~~
geofft
My reading (and another comment implied the same thing) was that the rumors
were that EMC would simultaneously spin off VMware and then get the rest of
itself acquired by the newly-independent VMware. Here's a _Re /Code_ analysis
that got picked up by _Fortune_ :

[https://recode.net/2015/08/05/emc-considers-a-buyout-by-
its-...](https://recode.net/2015/08/05/emc-considers-a-buyout-by-its-own-
subsidiary-vmware/)

~~~
vonmoltke
Can't spin off a subsidiary that is already a separate, publicly-traded
entity. VMWare is only a subsidiary because another corporation, and not a
real person, owns a majority of the stock.

------
chocks
On a side note: Last year John Chambers the then CEO of Cisco made a
prediction about IT consolidation in the future, wonder if this might be first
pieces of that puzzle: [http://www.businessinsider.com/cisco-ceo-brutal-times-
for-it...](http://www.businessinsider.com/cisco-ceo-brutal-times-for-it-
coming-2014-5)

~~~
zupreme
This is definitely not the first. It's been happening in the networking and
software spaces for years. Now the trend is moving solidly into the storage
realm.

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chocks
Here's the official press release:
[http://www.dell.com/learn/us/en/uscorp1/secure/2015-10-12-de...](http://www.dell.com/learn/us/en/uscorp1/secure/2015-10-12-dell-
emc-transaction)

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samfisher83
Why is the stock still trading at 28? It looks like the market doesn't expect
the deal to go through?

~~~
crapshoot101
I think its more that the market is pricing in two things in its probability
estimation:

1) The deal won't actually close until next summer. Even if we know for
certain that the price is locked in at the numbers specified (due to collars
or what not), you're investing at $28 to get $33 while locking up assets for a
year, while still being subject to risk of Dell issuing a lot of debt that's
going to get more expensive (when the Fed raises rates later this year). Ie,
its a nice ~15% yield for 1 year, but its a risky asset. Also, unlike typical
cases where a company is in play, this trading price suggests that the market
doesn't think an alternate bid (IBM? MSFT? ORCL?) is likely to emerge, or at
least not a more substantial one.

2) The structure of the tracking stock is unique, and its not clear if the
biggest agitator in EMC (Elliot) is on board with this transaction.

My personal bet is that the deal will go through - but the markets are
probably pricing in the a) long time frame and b) potential debt exposure from
an interest rate rise that may blow it up. For what its worth, in most
transactions like this, there's always some gap between the "sale price" and
the trading price.

~~~
mcintyre1994
Elliot seem to be on board : [http://www.marketwatch.com/story/elliott-
management-comments...](http://www.marketwatch.com/story/elliott-management-
comments-on-emc-dell-transaction-2015-10-12)

------
devonkim
I feel the most pain for the former Compellent engineers right now because
they're likely going to be the ones getting laid off since they'll directly
overlap with EMC's product lines except for the lowest budget stuff that
nobody in their right mind should use.

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kriro
What's the ethical situation for a journalist who leaks this like? How long
and hard do you question the agenda of your source? Don't you usually need
multiple sources before you publish something like this? I'm not a journalist
but am curious how these "insider info that most certainly will influence the
deal price" scenarios are generally handled.

~~~
GBond
It is often the case a leak is intentional. The Journalist gets their story -
leaker get the intended word out with Anonymous Source protection (the
"greater" ethic). In this case the motive may be lead time for other bidders
to throw their hat in the ring.

~~~
yuhong
Thinking of it, this reminds me of the Twitpic fiasco. The problems need to be
fixed.

