Amid all the wondrous things that technology has brought to humanity over the years, it is easy to forget that this is still a business. That means developments like the cloud and mobile communications cannot work their magic until someone, somewhere derives a profit from it.
This is not a bad thing, mind you, considering that in this world nothing is free. But it does point up the fact that business considerations often trump technology, and in the end the needs of the few can and do outweigh the needs of the many.
Which brings us to EMC and HP. The two are apparently in pretty deep talks about merging, which would produce one of the largest tech companies the world has ever seen, with more than $130 billion in annual sales, according to some estimates. Word on the street is that they have worked out the top executive positions and, presumably, the major product line integrations, but have yet to sell the plan to their respective shareholders. HP backers, in particular, are said to be leery of major deals following the Autonomy fiasco.
On the EMC side, however, pressure for some kind of deal is coming largely from Elliott Management, a $25 billion hedge fund led by financier Paul Singer, who has acquired a 2 percent stake in the company – close to $1 billion – that some say is a wedge to carry out the specific purpose of breaking EMC apart. Rumors were swirling around earlier this year that EMC was about to rid itself of VMware, a move that may or may not still be part of any planned merger with HP.
Both companies, of course, are known for world-class technology and strong, if not dominant, positions in a number of enterprise data center product lines. But the question remains: Does a merger make sense? According to The Wall Street Journal’s Dan Gallagher, past performance in traditional data center circles is no guarantee of future growth, particularly now that the old-line infrastructure model is undergoing such dramatic change. That two titans of a fading industry could somehow emerge as a powerhouse in the new economy strikes many people as unlikely at best.
But this is assuming that neither EMC nor HP can adapt to changing times, and that is not necessarily the case here. EMC, after all, kick started the modern virtualization movement that led to the cloudy, software-defined infrastructure that is now reshaping the industry. And, so far, HP’s turnaround plans have been met with cautious approval from investors. The company reported record revenues in the third quarter, even pulling out a gain in networking – a feat that even Cisco couldn’t match.
So what can we conclude from all this? Is this a case of well-connected insiders killing off a pair of aging but still vibrant beasts just to feed off the bones? Or is this our economic system at work, weeding out inefficiencies in business models that are about to be out-classed by changing times anyway?
My guess is that it’s probably a little of both. More often than not, there is just as much profit to be made from declining industries as emerging ones, and if the investor class has already read the writing on the data center wall, then it probably won’t be long before market forces would have impelled these kinds of changes. At least now, both EMC and HP can approach each other from positions of relative strength.
And the rest of us? What do we get? If the capitalist system works the way it’s supposed to, we get a steady stream of advancing technology delivered in a timely fashion and at the lowest possible price point. If not, someone is losing money somewhere, and that’s not good for business.
Arthur Cole writes about infrastructure for IT Business Edge. Cole has been covering the high-tech media and computing industries for more than 20 years, having served as editor of TV Technology, Video Technology News, Internet News and Multimedia Weekly. His contributions have appeared in Communications Today and Enterprise Networking Planet and as web content for numerous high-tech clients like TwinStrata, Carpathia and NetMagic.