Today, Dell announced that it will buy EMC for $67 billion. The deal represents the largest in technology history...
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and also raises questions about the fate of certain EMC products, including its struggling enterprise content management product, Documentum.
As part of the deal, EMC will go private and become part of Dell, which will end the company's history as a publicly traded company. EMC's most prized asset VMware -- the dominant virtualization software provider in the industry, in which EMC has an 81% stake -- will remain publicly traded.
In addition to the massive scope of the deal, it's surprising that Dell, with a valuation of $25 billion, will purchase EMC despite the fact that its' about half the size of EMC.
Dell said it will fund the deal through a combination of new common equity from CEO Michael Dell, Silver Lake and others, stock, new debt financing and cash on hand. Dell recently reported that it had about $12 billion of debt. Dell will continue as CEO and Joe Tucci, EMC's longtime CEO, will retire. Dell may also sell a portion of its stake in VMware to fund the deal.
The fate of Documentum
EMC has put down strong roots in many areas of data center infrastructure technology -- from server hardware to RSA security technology and storage devices -- ECM software isn't one of the lucrative products that Dell was angling to acquire.
In the wake of the deal, less successful product lines such as Documentum ECM software, may be left to languish. EMC purchased Documentum in 2003 for $1.7 billion -- a high price tag at the time. Notably complex for users, Documentum has also been challenged by lightweight, cloud-based alternatives -- such as Box and countless others -- which have been disrupting the market for years. The question becomes whether Dell will try to breathe new life into the enterprise content management platform, let it languish or sell it off.
Some experts believe that dumping Documentum is in the offing. Dell may want to set its sights on core data center infrastructure products but not enterprise applications such as Documentum.
"Dell … wants to strengthen its storage and security offerings," wrote consultant Laurence Hart in a recent blog post on the deal. "EMC is perfect for Dell with a strong storage portfolio and RSA to secure it all. Documentum is nowhere to be seen on any analyst's radar as a positive component of the deal."
The deal will take several months to shake out, so it is, as Hart noted, a "wait-and-see game."
But, he noted, "If I was a betting man I'd start looking for wood to use to build that pyre."
Real Story Group founder and analyst Tony Byrne described the deal as a "marriage of two declining concerns" that may yield some back-end synergies, but could also face challenges in a marketplace that's driven more by quality of individual offerings than the need for one-stop providers.
If best of breed trumps one-stop-shop technologies, the deal may add little value for users. "I don't see a future where customers gain anything from procuring Dell servers and EMC storage from the same vendor," wrote Byrne, in a recent blog post. "EMC and Dell have each failed separately to effectively bundle their manifold offerings already; what makes them think it will more be successful together?"
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