About that Dell-EMC Deal

OK, it’s been three weeks since the Dell-EMC deal was announced. What have we learned? Is this a metaphorical mating of two giant metaphors? A reflection of natural consolidation in the tech industry?  A smart operator taking a giant enterprise private in order to outrun its giant competitors? All of the above?

Here’s a good deal primer from Wikibon from Day One.

The initial take from the geeks and the pundits alike was that they didn’t see how this would help anybody, from employees to shareholders to customers. The HP-Compaq merger remains in our psyche like the memory of the bad church picnic where everybody got food poisoning from the deviled eggs. However, we tend not to remember the many acquisitions that didn’t result in projectile vomiting and endless diarrhea. (And the HP-Compaq deal had much more infighting, corporate politics, bad management, a different corporate structure and mismatched expectations than the mega-Dell that we’re looking at.)

Still, this is the biggest tech deal in history (although not the “biggest merger” by any means), so it should get a justifiably high degree of scrutiny.

From the vantage point of cloud providers, the deal looks complicated and backward-looking. Here’s a pretty bearish take from Cloud Technology Partners, who would be happy to move you into a cloud. 10 Key Takeaways from the Dell / EMC Merger by Joey Jablonski.

ESG’s Steve Duplessie was one of the first people that weighed in last week, after the first negative reactions were published, to say, wait a minute, if people are still going to want to buy kit, these guys are not piloting the Enterprise Titanic. Dell and EMC — Sanity Check

This is a world where less vendors are sought after – more convergence is inevitable for products and vendors. It’s also a world where a few big guys have ALWAYS dominated, and it will remain so. That doesn’t mean customers will only buy from one guy – but they will buy from a few big guys – the way they always have. Oracle, Microsoft, VMware, EMC, Dell, HP, IBM, Cisco….and then the list gets harder and harder to keep up with. Buyers care about service and support – in storage it’s the number one thing they care about. Dell/EMC has that figured out – in the most demanding shops on the planet. They want the cloud – but will they want it piecemeal? Will they stay with AWS for development but not production? I don’t know, but the data says they want more complete offerings from less and less vendors.

Why they’re doing it

In short, Dell and EMC are merging to be the infrastructure industry’s Big Ass Voltron. In The End of the Storage Industry As We Know It. Wikibon’s Stu Miniman rightly points out that this is about infrastructure as a whole, not just solutions: “In the not-too-distant future, when Dell logos are on buildings in Hopkinton and other EMC offices, will the company still be known as a storage company?” It’s also worth noting, Stu points out, that the next gen public storage companies (FIO, VMEM, NMBL, PSTG) are combined doing < $1B revenue.

EMC SE King Chad Sakac is worth reading to parse the insider thinking. He’s big on speed, culture, and agility. And not messing it up. The Federation may have been confusing in places, but it kept the parts more nimble than squishing them together.

Sheryl Koenigsberg (ex-Dell, now Infinio) blogged some personal reflections on the Dell-EMC relationship and respective cultures that, while not black-and-white, probably reflect a lot of employees who are gearing up to go make this work.

Public vs Private and Activist Hedge Funds

What hasn’t been discussed as much amongst the techies is that this is another data point that the public markets have had a distorting effect on company performance. Andreessen-Horowitz, who have holdings in a number of private unicorns, is naturally very interested in the public-private question and the risk of activist hedge functions and does a great analysis on their blog. This is 7700 words of prime bedtime reading. Making Sense of Dell + EMC + VMware by Jamie McGurk et al at the a16z blog.

And that’s the crux here: The people most personally and passionately vested in the company (Michael Dell could have just as easily walked away, yet didn’t) want the freedom to operate in a nimble, I’m-playing-the-long-game way. Activist investors, meanwhile, focus on extracting money in the short term regardless of the actual long-term business strategy — as Michael Dell put it, for activists, it’s more about the “poker game” than the company.

The blog post also explains some of the dynamics going on right now with VMW stock. (As I’ve disclosed, I remain a shareholder and ouch!). Michael Dell is saying all the right things about VMware independence. The markets still don’t quite trust him.

Other stuff

Dell exec Marius Haas on the Nutanix partnership at CRN. To paraphrase, “Don’t F Up The Pipeline!” but few words on the future.  Also as pointed out by Steve and Stu and Chad above, Marius mentions that management on both sides have worked together already at Dell-EMC and past gigs. Lots of co-mingled DNA.

Wikibon analysts on #theCUBE with the Dell World wrap up. I liked Stu’s observation that Dell’s history of working closely with Microsoft might be interesting both for the channel and for the company’s cloud strategy.

A16z podcast: EMC + Dell: Why The Python Just Ate The Cow

 

posted by on October 27, 2015

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