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Storage I/O trends

Dude, Dell is Getting (Buying) an EMC and VMware Deal

Some of you might remember the marketing campaign "Dude you're getting a Dell" to show somebody buying a Dell computer.


Today, Dell as in Michael Dell and his corporation Dell along with partner Silver Lake investment announced a $67B USD deal that they are acquiring EMC along with their stake in VMware which will stay an independently public traded company. Dell brings strength in small and medium-mid market strength and supplier to cloud and other managed service providers, Dell financing combines with EMC strength and enterprise portfolio. This deal also reunites the two parties who before had a strong storage joint venture with Dell OEMing EMC storage for about a decade before going their separate ways in the late 2000s.


Dell buying EMC

Key points

  • Privately held Dell is acquiring EMC and its various business units
  • VMware will stay independent public company with Dell as major owner
  • EMC based in Hopkinton Massachusetts will be headquarters for new Dell Systems Business Unit
  • Dell Systems Business Unit will also be headquarters for Dell servers
  • New Dell Systems Business Unit joint with EMC is expected to be a $30B USD plus sized entity
  • Dell see's revenue synergies of about 3x over 1x cost of the combined entities
  • Dell see's ability to generate cash to service debt coming from increased revenue growth
  • EMC global  support, professional services, consulting to complement Dell capabilities
  • Ability for both partners to leverage their best of strengths from SMB to enterprise to cloud

What this means big picture

Basically EMC has gone private under the Dell umbrella while VMware remains an independent publicly traded company, granted with EMC and now Dell being the primary shareholder of that entity. Dell went private back in 2013 with its founder Michael Dell along with Silver Lake Partners as key investors. EMC has been under pressure from activist investors to sell off its investment in VMware to increase shareholder and was rumored to have been in acquisition discussions with other organizations such as HP. Now EMC (e.g. the non-VMware part) is effectively a private held company as the Dell Systems Business Unit to be initially headquartered in Hopkinton Massachusetts (EMC Headquarters) while Dell Corporation headquarters will remain in Austin Texas.


The server business will be based in Hopkinton, which will be targeted at around a $30B USD business. Ironic that Massachusetts used to be a focus for server vendors from Dell (acquired by Compaq and then HP), Wang, DG (acquired by EMC) among others. This transaction puts Massachusetts back on the map as the Dell System Business Unit will also now be home to Dell servers. As of the announcement, there is an expectation that the Hopkinton headquarters will grow vs. shrink. Granted., some consolidation can be expected.

Some questions that exist (among many others)

What about Pivotal?


One of the questions I have is that during the announcement discussions, not much if anything has been said about Pivotal and its future role or how it will be folded in, or set up as a tracking stock or similar activity. Also something to keep in mind as food for thought, or speculation, is that GE is an investor in Pivotal and GE has made noise about becoming more prominent player in software, just saying. In the meantime, let's wait and see what happens with Pivotal.


What about Lenovo relationship?


After the last Dell breakup, EMC established a partnership and initiative with Lenovo to jointly produce servers that had been being sourced from Dell or others, as well as EMC moving its Iomega SMB storage business into the Lenovo initiative. Note that about a year ago Lenovo bought the former IBM x86 server business. What will become of that partnership for servers, as well as for Iomega moving forward?


How will product rationalization occur?


There is some product overlap in the storage business, as well as backup/data protection among some other areas. However looking at the bigger picture, there is not much if any overlap. Where there is overlap, one near-term approach that might (this is speculation) occur is to segment potential competing products into Enterprise and Systems business vs. SMB or entry-level. This could occur for storage products such as Dell Compellent, Exanet based Fluid NAS, EqualLogic and MD (OEM from NetApp) vs. those from EMC such as VMAX, VNX, Isilon, XtremIO, Datadomain among others. Likewise, there will need to be some rationalization for backup and data protection products such as EMC Networker, Avamar vs. Dell AppAssure, vRanger, NetVault as well as their OEM partners Commvault and Symantec among others.


VCE gets leveraged as part of go to market?


EMC took over ownership of VCE in 2014 with Cisco still involved, in fact if a product has Vblock in its name, it will be a Cisco server and network. However look for other VCE solutions to appear as well as the VxRACK announced earlier this year. I would expect new converge infrastructure (CI), hyper-converged infrastructure (HCI) and Cluster-in-Box (CiB) solutions from VCE that would include Dell servers in the future leveraging different software (VMware among others).


How will Dell OEM business drive things?


Dell has had a server OEM business that has supplied technology to others, including in the past EMC. This business moves in under the new System Business Unit as part of what is or was EMC. Beyond servers, it will be interesting to see how that business unit can also move other technologies into the OEM or high volume market including to cloud and managed service providers who buy in bulk.


Will this cause Cisco an EMC partner to buy another storage vendor?

Maybe, that depends on what Cisco wants to do moving forward in addition to remaining a partner with EMC. Of course, if Cisco were to go storage shopping, who would that be? Perhaps DDN, Nimble or NetApp?


With Michael Dell now having done one of, if not the largest tech deals in history, how will Larry Ellison of Oracle react?


It has been said that the difference between God and Larry Ellison is that God was not interested in becoming Larry Ellison, however, is Larry Ellison still interested in industry bragging rights meaning will he want to do a big block buster deal involving Oracle to get some headlines, or enjoy his semi-retirement, perhaps buying a bankrupt country or something?

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