The Dell EMC merger finally happens


This content is over 24 months old. While the research and opinions expressed by Neuralytix was valid when published, readers should not rely on the applicability of the content in the context of today’s market.

Today is a historic day in the IT industry. The largest merger in the history of the industry finally takes place. Dell and EMC merge to create the largest privately held IT company in the industry, now named Dell Technologies.

The merger is historic in a number of different ways:

  • While most startups want to go public, Dell and EMC have gone private
  • While many companies are splitting (e.g. HP and Symantec), they are merging

Going from public to private

While most startups and established IT firms aspire to go public, Dell and EMC are bucking this trend, and have gone private. Neuralytix believes that this is a very strategic move on the part of Dell Technologies.

Dell was struggling in the high-end enterprise space, especially in terms of datacenter storage, cloud, and converged infrastructure; and EMC had a limited presence in the ever increasing mid-market. The resulting Dell Technologies now has the best of both worlds – in terms of client computing and datacenter; traditional on-premise and cloud infrastructure; and rounds out a number of gaps in an otherwise very complete portfolio of solutions.

While many are split, Dell and EMC merge

HP and Symantec are two prime examples of companies that have split under the heavy weight of running a company with diverse portfolios. HP has split its client and datacenter businesses, while Symantec has spun of its previous acquisition of Veritas back into a separate company again.

However, as mentioned earlier, Dell and EMC have complementary and synergistic portfolio, making the merger the right approach.

What does Dell Technologies look like?

On the press and industry analyst call held on September 7, 2016, Dell Technologies shared the following facts:

  • $74B total revenue across all companies (FY 2016 GAAP pro-forma revenue)
  • 140,000 total employees across all companies, with presence in 180 countries
  • Over the past three years, cumulative Dell Technologies investments in R&D have been more than $12.7B, with plans to invest $4.5B per year going forward
  • Serving 98% of Fortune 500 companies

Neuralytix’s Opinions

Neuralytix believes that the merger is one of the most positive moves by the IT industry in a very long time. We are particularly encouraged by the combined portfolio that seems to have very little gaps.

That said, the new Dell Technologies represents a very different organization that will require the integration of two very different cultures. It’s dual headquarters – Austin, TX for Dell client computing, and Hopkinton, MA for Dell EMC – may help, by allowing the cultures to meld over time, without the need to force the two organizations to work as one immediately.

Other challenges that Dell Technologies will face, is on the storage side. Neuralytix believes that there are 15 distinct storage platforms in the newly merged company. This is probably three times the number of platforms that would be considered “reasonable.” These will be tough decisions and many employees and other observers will no doubt have strong opinions whatever decisions are made in terms of consolidation.

Additionally, there will be other challenges such as those solutions that are created organically (such as EMC VxRAIL) and those that are partnered, or OEM (such as the Dell XC converged appliance). Despite very loud protests by Dell EMC that both products will coexist, there are significant overlaps in terms of some mid-market customers who would benefit from either product. Furthermore, where VxRAIL is made up of all Dell Technologies products, the Dell XC converged appliance incorporates an external product that will reduce the margins for Dell, compared with VxRAIL, and is also dependent on a third-party developer, which is not consistent with EMC’s culture.

That said, all these are temporal issues, and should not be considered anything other than “teething problems” of a newly formed, massive company.

Overall, Neuralytix emphasizes its belief that this merger is good for both Dell and EMC, and good for the industry overall. It brings together leaders in many technology areas, and with a strong emphasis on the cloud, Neuralytix believes that of all the full-line manufacturers such as HP, IBM, Lenovo, et al., that Dell Technologies is in the best position to take on the next generation of competition in the form of cloud providers such as Amazon AWS, Microsoft Azure and others.