Dell to buy EMC in $67 billion record tech deal, aims for cloud market

Mon Oct 12, 2015 3:44pm EDT
 
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By Greg Roumeliotis and Jim Finkle

(Reuters) - Computer-maker Dell Inc struck a deal on Monday to buy data storage company EMC Corp for $67 billion, setting a record in the technology industry, as it tries to transform itself into a giant in the fast-growing market for managing and storing corporate data.

The acquisition, the year's third-largest in all sectors, highlights the frenzy of dealmaking sweeping the economy, as big or mature companies take advantage of low interest rates to buy rivals as a way to spur growth.

The deal should help privately held Dell, the world's No. 3 computer maker, diversify from a stagnant consumer PC market and give it greater scale in the more profitable and faster-growing market for cloud-based data services.

That desire to reach beyond PCs - whose growth has been stopped in its tracks with the rise of mobile devices - echoes moves by Dell's big rivals. Hewlett-Packard Co, the No. 2 PC maker, is splitting off its computer and printer unit this year to focus on the corporate data business. IBM Corp sold its PC unit a decade ago.

By combining Dell's server businesses with EMC's storage and virtualization assets, the new, enlarged company will have a broader range of products to challenge Cisco Systems Inc, IBM and Hewlett-Packard in the areas of cloud computing, mobility and cyber security.

"I don’t think either Dell or EMC were viable over the long run as a standalone; they really needed each other," said Eric Johnson, dean of the Owen Graduate School of Management at Vanderbilt University. "Dell was mostly on the consumer side, which is a terrible place to be. EMC had some enterprise products, but not the complete package."

The deal valued EMC at $33.15 a share as of the end of trading Friday. Dell will pay $24.05 per share in cash and will also give EMC shareholders a special stock that tracks the share price in VMWare Inc, the maker of cloud-based virtualization software majority-owned by EMC.

The stock market gave the deal a lukewarm response. EMC shares rose 1.8 percent to $28.36 after earlier jumping more than 2.5 percent. VMware shares plunged 7.8 percent to $72.48, decreasing the value of Dell's offer.   Continued...

 
Dell logos are seen at its headquarters in Cyberjaya, outside Kuala Lumpur September 4, 2013. REUTERS/Bazuki Muhammad