Dell to buy data storage provider EMC in $93.5b deal

The deal would combine EMC's dominance in devices that store data with Dell's No. 2 position in servers. Dell could use the combination to expand its product line-up in high-end data storage equipment and seek to lure customers away from rivals inclu
The deal would combine EMC's dominance in devices that store data with Dell's No. 2 position in servers. Dell could use the combination to expand its product line-up in high-end data storage equipment and seek to lure customers away from rivals including Hewlett-Packard.PHOTO: REUTERS

NEW YORK • Dell will buy data storage company EMC Corp in a deal valued at about US$67 billion (S$93.5 billion), creating a corporate-computing giant in the largest technology merger.

The deal would combine EMC's dominance in devices that store data with Dell's No. 2 position in servers, the powerful machines that help companies handle big computing challenges.

Dell plans to pay US$24.05 a share in cash plus tracking stock in EMC's prize holding, VMware, valued at about US$9 for each EMC share, the companies said in a statement yesterday.

The price of US$33.15 a share is 28 per cent above EMC's closing level last Wednesday, just before reports surfaced that a deal was in the works.

No longer can a company like Dell thrive simply by making personal computers. In striking the deal, Dell and its financial backer, investment firm Silver Lake, are betting that a huge acquisition will help the firm keep up with the times.

Buying EMC would give it one of the biggest names in computer data storage, adding to existing offerings like network servers, corporate software and mobile devices.

For EMC, the agreement addresses pressure from activist investors who have been agitating for growth and resolves long-standing questions over succession for chief executive Joe Tucci.

EMC rose 2.5 per cent last Friday to close at US$27.86 on the New York Stock Exchange.

Dell, which was taken private for about US$25 billion in 2013, could use the combination to expand its product line-up in high-end data storage equipment and seek to lure customers away from rivals including Hewlett-Packard which itself is splitting in two next year.

Dell is speaking to banks about fund-raising to finance the purchase. VMware, which makes tools that help servers run software more efficiently, is valued at US$32.3 billion, while EMC has a market capitalisation of US$53.6 billion.

"This merger bodes well for the next generation of innovator," said Mr Matt McIlwain, a managing director at Madrona Venture Group, which invested in Isilon, that EMC acquired, and other storage start-ups that compete with EMC.

"Legacy tech companies have little alternative than to use financial engineering to keep shareholders happy in an era of fundamental technology disruption."

Mr Dave Farmer, a spokesman for EMC, did not immediately respond to messages seeking comment. Mr Jim Hahn, a spokesman for Dell, declined to comment.

"Dell has transformed away from just PCs to offering end- to-end services, and EMC could help it do more of that," said Mr Bryan Ma, a Singapore-based analyst at IDC.

BLOOMBERG, NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on October 13, 2015, with the headline 'Dell to buy data storage provider EMC in $93.5b deal'. Print Edition | Subscribe