Dell-EMC Deal Closes, But How Sweet a Deal Is It?

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It’s the dawn of a new industrial era and Dell Technologies will lead the way. 

At least that is what Michael Dell, chairman and CEO of Dell Technologies, believes and he has put big bucks behind his bet.

This morning Dell officially closed on its acquisition of EMC, spending a record-setting $67 billion on the storage giant to form the world’s largest ($74 billion) privately held technology company. The logic behind the deal, according to Forrester analyst Glenn O’Donnell, is sound.

But not everyone is bullish.

A New Industrial Era

We are indeed “at the dawn of a new industrial revolution, brought on by the cloud, the Internet of Things (IoT) and other digital forces,” said O’Donnell. He was careful to note that the new industrial era has not been born by Dell’s acquisition of EMC. “We’ve been in it for a while,” he said.

And while computing giants like Microsoft, Amazon Web Services (AWS) and others have won their space as cloud providers for the enterprise, companies will continue to compute on-premises and in private cloud and hybrid cloud set-ups.

Dell wants to own that space, as does Hewlett Packard Enterprise and others. 

Short Term Thinking in a Long Term Business?

Michael Dell’s strategy is that by combining EMC’s assets (EMC, Pivotal, RSA, SecureWorks, Virtustream and VMware) with Dell’s, his company will be able to be a one-stop shop to serve the infrastructure needs of small, medium and enterprise-scale businesses.

“The hybrid, private cloud is a big play and Dell Technologies (post EMC-acquisition) has lots of great, additional stuff to offer,” said O’Donnell, noting that RSA and Secureworks are solid products for protecting business information assets, that Pivotal’s Cloud Foundry offers a solid development platform for digital era applications and that VMware, more or less, owns the virtualization space.

But Constellation Research analyst Holger Mueller isn’t as bullish on Dell’s long terms prospects.

Given that Dell is betting on EMC’s Software-Defined Data Center products, “The question is how many (data centers) will remain on premises. And when it comes to hybrid cloud management — as outlined last week with VMware — it is good to understand what is on premises and make it multi cloud enabled, secured to move forth (and back) to public cloud … but that is a one way street in the long term,” Mueller told CMSWire.

In other words, building a gargantuan business for a non-cloudy world may not be a smart bet over the long haul.

Rising Stars and Cash Cows

Mueller’s colleague and Constellation Research founder R. Ray Wang told CMSWire that EMC brings some wonderful assets to Dell, but that’s not all that it brings.

“Every large company like Dell has future potential stars, cash cows and dying stars. There are too many dying stars in Dell’s portfolio,” he said.

Wang pointed to VMWare End User Computing, AirWatch, Pivotal Cloud Foundry (not the big data or database offerings) and Virtustream for SAP (not other Virtustream apps, still to be proven) as the rising stars.

He also noted that the (now Dell) EMC Infrastructure Solutions Group, in his opinion, “has largely failed” to provide public cloud providers with assets. If that continues to be the case and “if you consider a medium aggressive move to cloud and assuming that Dell will not have any game in providing public cloud providers with assets,” explained Wang, the EMC takeover will be a bust.

“The true stars in the (Dell Technologies) portfolio are “not enough at the moment, in my opinion,” said Wang.

He also noted that the EMC acquisition has left Dell in substantial debt and that “Michael wants to be free of debt. EMC gives him currency to sell,” he said.

CMSWire reported on Dell’s sale of Perot Systems and Gartner Magic Quadrant Advanced Analytics Leader StatSoft earlier this year. Now that Michael Dell controls EMC Dell’s enterprise content and collaboration assets like EMC Documentum and EMC Leap, he may be more eager to sell than was former EMC CEO Joe Tucci who brought them into the company’s hold.

Can Customers Feel Confident in EMC Assets?

And that may bring concern to some customers.

“This Dell EMC deal gives Dell an opportunity to get enterprise software right, but Constellation is worried for EMC customers because Michael’s strategy appears to be about paying his debtors through asset sales without a clear point of view on the future of Dell,” said Wang. “This challenge makes it very hard for customers to feel confident that the EMC assets will be in stable hands.”

A point well taken as the fate of EMC’s Enterprise Content Division (is it now called Dell EMC ECD?) remains at the top of mind for many. We are waiting to speak with Dell EMC about its prospects.

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