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With the Dell-EMC deal still taking shape, there has been ample question about the wisdom of Dell's $67 billion purchase of EMC.
Dell agreed to buy EMC for the hefty price tag earlier in October. Dell will have $40 billion of debt as a result of the EMC buyout, and there is speculation that it will have to sell even lucrative pieces of EMC's portfolio to fund the buyout.
Why would Dell, whose valuation is about $25 billion, go into debt for EMC? As a traditional server hardware vendor, Dell seems to be angling to take a bigger piece of the hybrid cloud and data center infrastructure market. With EMC, it stands to gain several pieces of technology real estate, including high-end storage products, RSA Security and a stake in the privately held VMware.
"The small fish is buying the big fish, which is really amazing," said Ron Miller, an enterprise technology reporter and SearchContentManagement contributor, in this podcast. "In order to do that, Dell has to go into a tremendous about of debt. Dell is obviously, at its core, a server company; it's not a PC company. It wants to be a bigger player. It can't really compete in storage and hybrid cloud from its current position," Miller said.
But Miller also indicated that bigger is not necessarily better, and Dell has a tough road ahead, given that several of its competitors -- including IBM, HP and Oracle -- have been struggling to gain stability in the data center infrastructure market. Many companies, Miller noted, are trying to get out of the data center infrastructure business and allow a cloud provider to maintain their infrastructure for them. In this kind of environment, Dell may not have attractive offerings to sell if fewer companies maintain their own data centers.
"My feeling [is] it's going to be hard to make this deal work," Miller said. All data center infrastructure providers "are caught up in this whirlwind of disruption [created by the cloud]," Miller said. "GE has announced that it will close 90% of their data centers. A lot of companies are trying to reduce their data center footprint. It is going to be a tough road, given the increasing competition. It makes you wonder, can Dell and EMC be better together when all these other players that have been at it for a while and are struggling?"
For more, check out part one of the podcast above. For part two, click here.
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