Connect with us

Hi, what are you looking for?

HEADLINES

Dell’s EMC acquisition underscores drive for greater relevance, says Fitch

Dell Inc.’s acquisition of EMC Corp. underscores legacy technology companies’ drive for greater relevance in a remarkably competitive environment, according to Fitch Ratings.

The ratings agency says the deal will alter the competitive landscape in the technology space, creating increased competition for tech companies with significant complete enterprise computing services like Hewlett-Packard Enterprises (HPE), IBM, and Oracle.

Dell and EMC signed a definitive agreement under which Dell, together with its owners, will acquire EMC, a leading storage and virtualization provider, for a total consideration of $67 billion.

The acquisition will result in the world’s largest integrated information technology (IT) provider by revenues and will strengthen Dell’s storage and virtualization offerings, providing higher profit margin growth opportunities.

The acquisition adds significant scale in storage for enterprise customers as Dell continues to pivot away from roots in personal computers (PC). Dell expects revenue synergies from the ability to offer converged infrastructure (combined storage, networking, and servers) as a result of the combination.

Nonetheless, Fitch does not believe the deal in and of itself addresses top line pressures facing each company as the market shifts to cloud-based software and standardized solutions from legacy on-premise hardware products.

Advertisement. Scroll to continue reading.

The acquisition should strengthen Dell’s competitive position among leading IT providers, including IBM and HPE, although at a time when HPE is separating from its lower growth PC and printing units to sharpen focus on enterprise markets.

Fitch notes that the 60-day “go-shop” period could spur large technology rivals without significant storage capabilities, including Cisco Systems (Cisco), to make a bid.

Dell’s already significant scale provides procurement efficiencies for memory, hard disk drives and other components utilized across the hardware business, specifically PCs, servers, and storage. The EMC acquisition only bolsters that effect.

On Oct. 13, Fitch placed the ratings for Dell and its direct wholly owned subsidiary, Dell International LLC (Dell International), on Rating Watch Positive following the announcement that Dell will acquire EMC for a total consideration of $67 billion. Fitch’s actions affect $14.8 billion of total debt.

The deal is subject to customary conditions, including receipt of required regulatory and EMC stockholder approvals, and is expected to close mid- to late-2016. It also includes a “go-shop” provision, meaning that if EMC gets and entertains a better offer during a certain timeframe, the company will pay Dell substantial penalties. ($2.5B at onset; additional $2.5B if another deal is completed within 12 months of Dell deal termination; $4-6B additional termination penalties specified in agreement)

Advertisement. Scroll to continue reading.
Advertisement

Like Us On Facebook

You May Also Like

COMPUTERS

The Latitude 7320 Detachable is designed for mobile professionals that are driven to grow their business and want a thin and light device.

HEADLINES

The Boomi AtomSphere Platform is a low-code iPaaS offering with pre-built connectors to integrate legacy data and applications with AWS.

HEADLINES

Boomi has thrived in one of the toughest economic climates in history. Customers are driving change in their businesses with Boomi, automating business processes...

GAMING

Introducing four new Dell Gaming displays with options suited for framerate-demanding multiplayer combat to expansive open-world RPGs and high-octane racing games.

COMPUTERS

Today, we start a new chapter with AMD announcing not one but two new gaming laptops -- introducing the redesigned Alienware m15 Ryzen Edition...

COMPUTERS

Powered by latest 11th Gen Intel Core vPro processors, the Dell Latitude 7420 and 5420 set a new standard in performance for business laptops.

HEADLINES

Dell Technologies ushers in the next generation of computing with its most powerful and secure Dell EMC PowerEdge server portfolio. With the new servers,...

HEADLINES

With these new enhancements to Flow, businesses can increase the value of customer, employee and partner relationships by delivering trusted engagement, fast.

Advertisement