Dell’s Buyout Of EMC Corporation (NYSE:EMC) Would Bolster Scale, Add Hugely Important Software Assets

It is emerging that Dell Inc.  is considering acquiring storage giant EMC Corporation (NYSE:EMC) in what could be a mega leveraged deal. Dell is reportedly ready to make a buyout offer of $24 per share for EMC. With such an acquisition, Dell would significantly bolster its scale in big-data and also harvest key software assets. However, there will also be a number of challenges to contend with in the new dispensation.

It doesn’t come as a major surprise that EMC could be joining Dell. EMC has, in recent times, shown willingness to join forces with suitable partners. There were also speculations that it was willing to enter a downstream merger with its subsidiary called VMware, Inc. (NYSE:VMW).

Cheap borrowing opportunity

A union between Dell Inc. and EMC would be perfect from each company’s standpoint. Although Dell would have to dig deeper into its pockets and possibly take more to fund the acquisition, the effort would be worthwhile. Moreover the low interest rates make borrowing cheap, and Dell can take advantage of that to raise funds for an EMC buyout in a less painful manner.

When the deal is completed and EMC is properly integrated into Dell, the resulting combined entity would have the much needed scale to compete in the rapidly changing big-data space. In addition to the benefits of economies of scale, Dell would be getting its hands on highly valuable assets. EMC is the owner of VMware, a key enterprise software company that will come under the control of Dell if the deal goes through. EMC also has another key platform in VNX, and Dell will be getting that as well.

Challenge in public cloud

However, Dell Inc. won’t have it all smooth if it chooses to gobble EMC. Both companies have limited reach in public cloud and that won’t change immediate they come together.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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