Dell Inc on Monday said it is buying EMC Corp, the world’s largest data-storage provider, for US$67 billion in a record tech tie-up to accelerate its move into the cloud and mobile market.
The mega merger would combine Dell, whose core global personal computer business is facing declining PC demand, with EMC’s strength in enterprise storage.
Dell said the acquisition of EMC “will create the world’s largest privately controlled, integrated technology company” in the US$2 trillion information technology market.
With EMC, Dell aims to beef up its firepower in storage and data management for businesses, and to take on industry behemoths IBM Corp, Hewlett-Packard Co and Cisco Systems Inc.
The deal also gives Dell cloud software giant VMware Inc, which is 80 percent owned by EMC. Dell said that VMware is to remain an independent, publicly traded company.
“We believe a deal with Dell would make sense for EMC and over time we expect the market to continue to consolidate to larger players that are able to offer full hardware solutions as opposed to piece parts,” Deutsche Bank analyst Sherri Scribner said.
The tie-up would make Dell “exceptionally well-positioned for growth in the most strategic areas of next generation IT including digital transformation, software-defined data center, converged infrastructure, hybrid cloud, mobile and security,” Dell chairman and chief executive officer Michael Dell said in a statement.
Dell is hoping to offset the continued weakening of the PC market, where sales volumes fell 10.8 percent in the third quarter, according to International Data Corp. The combination with EMC gives it the scale and capacities to expand its offer in cloud computing, a rapidly growing market.
Dell could combine with EMC to power big company networks, from backend servers to the laptop computers employees use on the go, analysts said.
“They are one of the only companies who can come in and provide end-to-end solutions,” Silicon Valley analyst Rob Enderle said. “Assuming you can connect the dots; say Microsoft Surface or Google Chromebooks tied into a Dell backend. You could do some interesting things no one else can do right now.”
Under the agreed deal, EMC shareholders are to receive US$24.05 per share in cash and a tracking stock linked in VMware, for an estimated combined value of US$33.15 per EMC share. That represents a 19 percent premium on EMC shares’ closing price on Friday last week.
The EMC board of directors has approved the merger and is to recommend approval by shareholders.
Michael Dell is to be the company’s chairman and chief executive officer.
The transaction is expected to close between May and October next year.
Dell’s headquarters is to stay in Round Rock, Texas, while the headquarters of the combined enterprise systems business is to be in Hopkinton, Massachusetts, where EMC is based.
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