Last week, I wrote about the back story that was likely driving EMC and Dell together. This included the need for a CEO who could take EMC forward, better product breadth and depth, a removal of breakup pressure for EMC, a stronger enterprise channel that would allow the company to better go after the huge HP opportunity in the near term, and a massive increase in software capability for Dell. I didn’t mention, but should have, that this will also improve sharply EMC’s capability in the mid-market and may provide Dell with a stronger solution for resellers. In addition, Dell and EMC have some very unique skills that, combined, could be really interesting.
Let’s talk about that in the shadow of what could be the most powerful and successful merger ever in tech, as Dell buys EMC.
One of the interesting things that the new company will have once it combines is one of the strongest sales channels ever created, spanning consumer, mid-market and enterprise. While Dell no longer challenges Amazon for dominance in online sales, it remains a power both there and in retail. EMC had sold its consumer/small business products to Lenovo because it wasn’t set up to sell them, but now could reconsider. EMC has been strong in the channel but otherwise relatively weak in the mid-market. It’s very strong in the enterprise, while Dell is relatively strong in the mid-market and relatively weak in the enterprise. Combined, this would give Dell an unprecedented strength from consumer all the way through enterprise that could result in some really fascinating solutions.
If you look at what Apple is attempting with Cisco and IBM, this would, in house, give Dell similar reach, but with the entire solution fully under Dell’s control so it could be engineered to function as a system as opposed to something assembled from parts that initially weren’t intended to work together. Until recently, HP has been the only other firm capable of doing this, but with HP’s split and this merger, suddenly Dell stands alone. That could be massively powerful for products and solutions that have as clients Chromebooks or even Microsoft Surface products and VCE as a backend, but with Dell server components at its heart, all end to end built and certified by the new Dell/EMC mix.
They could even do blended retail solutions with BYOD devices pre-certified to plug into web service backends, all powered by Dell/EMC, and it suddenly makes sense to come up with an even stronger “better together” marketing concept.
Dell has the strongest merger process currently in use by a major company. It is simply amazing that this practice isn’t more widely followed, given how each of Dell’s acquisitions has gained considerable value since this process was put in place. More typical is a catastrophic outcome from the acquisition in the more common process of mashing units together. This not only should support Dell’s premium price for EMC (it will be worth more as part of Dell), but give the combined entity far more power and capability for future acquisitions.
However, EMC has a unique skill as well in terms of creative acquisition/division funding. VMware is only partially owned by EMC and will remain public after the acquisition; Pivotal was co-funded by GE; and VCE initially was funded by EMC, VMware, Cisco and Intel. This is a level of flexible funding that the combined entity could also use, suggesting that it could do more large acquisitions, better protecting value while not incurring excessive debt. Even the acquisition of EMC appears to use this blend of skills, which would be uniquely powerful in business.
Wrapping Up: Could Be the Biggest Deal This Decade
This latest mega-merger has a lot going for it from the product perspective, but perhaps the most powerful parts are in the breadth of channels and acquisition and product unit creation skills. The total combination would have unprecedented scale and rival IBM in the 1970s in terms of reach and power, with skills that have only existed in Dell and EMC separately and now could be combined into an acquisition engine with unmatched potential. Typically, I’d say this is a big “if,” but given Michael Dell’s execution to date, I think the odds favor them actually pulling this off. We’ll see shortly, but this could well be the biggest and most powerful deal this decade and maybe for a good part of this century.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+