Dell Inc is in advanced talks to buy EMC Corp, people briefed on the matter said on Wednesday, potentially uniting two stalwarts of the technology industry as each faces pressure to revive its business prospects.
A deal would involve mostly cash, some of these people said. An agreement could be reached within a week, although these people also cautioned that talks were continuing and might still fall apart.
A takeover of EMC would answer years of questions about the fate of the 36-year-old company, which has grown from data storage into a collection of businesses, including network security and content management for corporate clients.
Critics have contended that EMC’s vaunted “federation” business model has produced little benefit for shareholders in recent years, with some investors calling for a breakup. Such demands have been largely rebuffed by EMC’s longtime chairman and chief executive, Joseph Tucci, 67.
EMC’s core storage business has faced pressure from rivals, including the likes of Pure Storage, a six-year-old company that went public on Wednesday.
Much of EMC’s value comes from its 80 percent ownership of VMware Inc, which makes so-called virtualization software, used to make efficient modern computing systems. VMware is worth US$34.3 billion, making EMC’s stake worth US$27.4 billion. EMC also has 98 percent of the voting shares in VMware.
EMC had a total enterprise value of about US$50.8 billion, according to data from Standard & Poor’s Capital IQ. Its stock price has fallen 12.7 percent so far this year.
EMC had previously held merger discussions with Hewlett-Packard Co, although those talks fell apart.
Since last year, EMC has faced pressure from Elliott Management Corp, a US$25 billion hedge fund known for shaking up companies it believes are underperforming.
In January, EMC reached a truce with the activist firm, appointing two new directors to its board.
However, while Elliott has waited patiently for sweeping moves by EMC, analysts have questioned whether the hedge fund would again publicly call for change. A standstill agreement between the hedge fund and the company expired last month.
Should Dell buy EMC, founded by Richard Egan and Roger Merino (the E and M of EMC), it would be a quiet end to one of the last US East Coast technology companies.
Dell has been stressing “converged systems,” which merge computing, storage and networking in one unit. EMC has significant assets in areas like data management and security that Dell could use to build up those offerings.
Dell, EMC, Silver Lake and Elliott declined to comment.
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