Dell In Talks To Acquire EMC – Report

The world’s third largest PC maker could be about to make a very expensive (and bold) acquisition which has the potential to shake up the technology industry for years to come.

Reports today have claimed that Dell is in talks to buy storage giant EMC Corp, at least according to sources speaking to Reuters.

EMC Acquisition?

The source asked not to identified because negotiations are confidential, and spokesmen for both Dell and EMC declined to comment on the report.

The deal would be an all-cash offer for Massachusetts-based EMC, and Dell is reportedly talking to banks to finance the deal, as any acquisition of EMC is likely to eye-wateringly expensive, even by tech standards.

EMC has a market capitalisation of $50bn (£33bn) as of Wednesday this week, and also owns a majority stake (80 percent) in virtualisation giant VMware, which is valued at $35bn (£23bn).

That said, EMC’s VMware stake accounts for most of the parent company’s market value.

If the acquisition were successful, it would propel Dell into the enterprise computing big leagues, competing with the likes of Hewlett-Packard and IBM. Dell has been manoeuvring for years to reduce its reliance on the PC business by growing its capabilities in the higher-margin enterprise IT market.

Investor Pressure

Dell and EMC have more in common than first appears on paper.

Both companies know all too well the bruising effects of having to deal with disruptive campaigns by activist investors.

CEO Michael Dell had a very tough time from an activist investor a couple of years ago. He had wanted to take Dell private in 2013, so it could escape the harsh scrutiny from Wall Street and the investor community.

Dell announced his intention of buying the company and taking it private in February 2013, but a number of large investors baulked at the $13.65 (£8.51)-per-share price, saying it was too low.

Within months, activist investor Carl Icahn made his own bid for Dell, and a bitter fight for the hearts and minds of Dell shareholders commenced for months. Michael Dell finally upped his bid and Dell’s board of directors changed the voting rules – in September 2013, and Dell’s shareholders then approved the deal.

Michael Dell was only able to take Dell private thanks to financial backer Silver Lake Partners, which financed the $24.9 billion (£15.5bn) buyout. The deal was finally completed in October 2013.

And EMC is currently in the midst of having to deal with its own activist investor and shareholder, in the form of Elliott Management Corp, which wants the company to spin off its VMware division.

EMC’s management team has until now been resisting that pressure, but has been dealing with challenge financial results of late. In January EMC admitted that a number of staff would lose their jobs in a fresh round of redundancies. Those job losses came despite a major restructuring in 2013, which saw the loss of 1,800 jobs.

And EMC has apparently been exploring its strategic options over the last couple of years.

In September 2014 the Wall Street Journal reported that EMC had been in talks for more than a year with Hewlett-Packard over a possible merger.

Those talks came to naught, but EMC was also reportedly in talks at the same time with Dell as well.

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