The combining of the two companies is mostly seen in a positive light by industry observer’s because along with a strong enterprise storage component, EMC could give Dell an avenue into the valuable hybrid cloud computing market. In spite of the issues, the deal edged steadily forward, and today it’s finally complete. The good news is that the two companies product lines are quite complementary without a lot of overlap.ĮMC Chairman, Joe Tucci. There are sure to be more to come as the two organizations consolidate and get rid of redundant positions. In January, VMware and EMC announced layoffs ahead of the deal being finalized in separate actions. There were also questions about how the deal would be taxed, and how Dell, the smaller of the two companies would pay such a huge debt load, reported to be in the $40 billion range (which is why it has to feel pretty good about that recovering VMware stock price). EMC decided to go it alone, but it certainly raised eyebrows at the time. Two months later, V Mware walked away from their part of the ownership stake. The new company will help customers manage their cloud operations, whether public, private or hybrid - no doubt, an attractive piece for Dell - but the deal quickly ran into trouble as already-agitated VMware stockholders began to balk, unhappy that the new company’s financials would be reported as part of VMware’s earnings. Shortly after the deal was announced, EMC and VMware announced that they were spinning out Virtustream, a company EMC bought for $1.2 billion in May, 2015, as yet another quasi-independent piece. While that’s not necessarily a bad thing, it did add another level of difficulty in getting the deal to the finish line. It announced a massive $650 million influx of outside funding from the likes of Ford and Microsoft last spring, and rumors have been circulating that it could go public at some point. With the stock price back close to its pre-acquisition announcement level, this should no longer be an issue.Īnother key independent piece is Pivotal, a company launched in a partnership involving EMC, VMware and GE, which helps companies become more digitally focussed. In addition, it agreed to pay what’s called a tracking stock, an amount that tracks against the share price of VMware. As the stock price dropped, it made the provision less valuable and shareholders increasingly nervous. EMC, and by extension Dell, owns 80 percent of the company, and the larger deal was structured in an unusual way that makes VMware extra important.ĭell agreed to pay EMC shareholders $24.05 per share. That recovery had to be an enormous relief for Dell executives and its financial backers because VMware is an important piece of this puzzle. After that, the stock began to recover slowly but steadily, and as of Tuesday, the price had rebounded all the way back to $73.39 a share. VMware stockholders didn’t take kindly to the deal, at least initially, and the share price began to plunge from $82.09 a share on the day before the sale was announced, all the way down to $43.84 on February 9th, its post-announcement low point. Chief among them is VMware, the virtualization giant, which is run as an entirely separate company to the point of being its own publicly traded stock. Unlike most big corporations with internal divisions operating under a single corporate structure with a single stock, EMC is a federation of affiliated and sometimes independent companies. Part of the problem is the way EMC is structured. Regulators and investors alike had lots of questions and it didn’t take long for problems to crop up. When you pay a record price, you are going to attract attention, and not all of it is going to be positive. What remains to be seen is whether this is ultimately a good deal for Dell, and if it can mold the two organization into a cohesive operation. Now comes the hard work of integrating the two companies. While the parties might like to frame this as a deal with little drama, the truth is that Dell faced several major legal and regulatory hurdles along with EMC and VMware stock holder skepticism along the way, but last week when Chinese authorities gave the go-ahead, the deal was finally all-systems-go. Almost a year later, for better or worse (richer or poorer), that deal is official today. On October 12th, the rumors proved true when Dell announced it was buying EMC for an astonishing $67 billion, a record price for a tech acquisition. Last Fall, rumors began circulating that Dell was interested in acquiring EMC.
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