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As a private company, Dell-EMC will enjoy a freedom HP can only dream of

Katherine Noyes | Oct. 13, 2015
Much of the deal's value pivots on Dell's ability to leverage EMC's sales force

Michael Dell at Dell World
Dell CEO Michael Dell opens Dell World on Nov. 4, 2014. Credit: James Niccolai

Dell's US$67 billion acquisition of EMC will give it access to a sales force notorious for its ability to "sell ice to eskimos," while EMC will gain a new foothold among mid-market customers. As a private entity, the combined result will face a freedom from market pressures that competitors such as HP can only dream of.

Those are just some of the benefits that could follow from the deal announced early on Monday.

"This industry is undergoing a fundamental transformation," said Crawford del Prete, an executive vice president with IDC. "You can't navigate it with short-term business decisions."

Trends such as digital transformation, the software-defined data center, the hybrid cloud, converged infrastructure, and mobile and security were among the those cited by Dell and EMC as particularly significant market forces.

Essentially, the acquisition means that "we're going to go into a tunnel on one side as two different companies, and we'll come out at the other end as a very different company," del Prete said.

The combination of Dell and EMC will create the world’s largest privately controlled, integrated technology company, the companies said. The structure of the deal, meanwhile, will "enable the business to make long-term investments without the pressure of quarterly results," said Egon Durban, a managing partner with investor Silver Lake, in a conference call Monday morning.

Dell has already enjoyed some of that freedom since it went private roughly two years ago, including the ability to incubate businesses such as Boomi and SecureWorks, said Dell founder and CEO Michael Dell.

"What we've seen over the last three to five years is that even companies that are continuously, significantly profitable are still getting punished by shareholders," said Charles King, principal analyst with Pund-IT.

In Dell's case, the result was to go private. Now, it's EMC's turn.

"The company is either No. 1 or No. 2 in virtually all the major markets it plays in, and it's consistently profitable, yet its shares have remained in the doldrums," King said.

Much of the deal's value pivots on Dell's ability to leverage EMC's sales force, which is notorious for its aggressiveness and ability to "sell ice to eskimos," del Prete said. "If Dell can leverage that and move ahead with products like Boomi and SecureWorks, that's huge incremental growth."

In the meantime, it's "open season on EMC salespeople," he added. Now that the deal has been announced, Oracle co-CEO Mark Hurd and HP CEO Meg Whitman are likely "calling as many EMC salespeople as they can."

 

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