Meg Whitman: Dell’s £44bn EMC Buy Is Good For HP
Dell’s $67bn acquisition of EMC will mean ‘chaos’ and ‘distraction’ for the company, its channel and customers, according to Whitman
The planned takeover of EMC by Dell for $67 billion (£44bn) is a good thing for Dell’s competitors, as it will create “chaos” in the sales channel and sap the resources of the combined company, according to HP chief executive Meg Whitman.
Whitman, who is set to become chief executive of HP Enterprise (HPE) when HP splits into two companies next month, told HPE staff in an emailed memo that she thinks the merger will be a disaster for Dell, in part due to the massive $2.5bn annual interest payments the combined company will be required to pay on the $50bn of debt it is taking on to finance the takeover.
Debt load
“That’s $2.5 billion that they will allocate away from R&D and other business critical activities, which will keep them from better serving their customers,” Whitman wrote.
She argued the efforts to integrate Dell and EMC, which together have nearly 200,000 employees, would prove an “enormous distraction” for staff, while bringing together the companies’ two product portfolios and sales approaches would create “confusion” for their customers and “chaos” in the sales channel.
“Customers simply will not know if the products they are buying today from either company will be supported in 18 months,” Whitman wrote.
Meanwhile, she argued, HP is in a strong position, with its split expected to be complete as of 1 November. “We are two years ahead of the game and it will be difficult for others to catch up,” she wrote.
The email was obtained and republished by a number of industry and financial media outlets.
HP split
HP was itself in merger talks with EMC last year, and it was after those negotiations failed over the companies’ inability to agree on a price that Whitman decided to split HP into two independent companies, each with a sharper focus – HPE, including data centre infrastructure products such as servers, storage and networking, and HP Inc., selling PCs and printers.
HP’s split mirrors a wider trend in the industry, which has also seen Google reorganise to give its various operations more independence under an umbrella company called Alphabet and EBay’s spin-off of PayPal.
For its part, Dell argues that the merger will help it create a one-stop shop for enterprise services. Dell has been working to shift its business model away from PC sales since it took itself private in 2013.
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