Dec
11
2018
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Dell’s long game is in hybrid and private clouds

When Dell voted to buy back the VMware tracking stock and go public again this morning, you had to be wondering what exactly the strategy was behind these moves. While it’s clearly about gaining financial flexibility, the $67 billion EMC deal has always been about setting up the company for a hybrid and private cloud future.

The hybrid cloud involves managing workloads on premises and in the cloud, while private clouds are ones that companies run themselves, either in their own data centers or on dedicated hardware in the public cloud.

Patrick Moorhead, founder and principal analyst at Moor Insight & Strategy, says this approach takes a longer investment timeline, and that required the changes we saw this morning. “I believe Dell Technologies can better invest in its hybrid world with longer-term investors as the investment will be longer term, at least five years,” he said. Part of that, he said, is due to the fact that many more on-prem to public connectors services need to be built.

Dell could be the company that helps build some of those missing pieces. It has always been at its heart a hardware company, and as such either of these approaches could play to its strengths. When the company paid $67 billion for EMC in 2016, it had to have a long-term plan in mind. Michael Dell’s parents didn’t raise no fool, and he saw an opportunity with that move to push his company in a new direction.

It was probably never about EMC’s core storage offerings, although a storage component was an essential ingredient in this vision. Dell and his investor’s eyes probably were more focused on other pieces inside the federation — the loosely coupled set of companies inside the broader EMC Corporation.

The VMware bridge

The crown jewel in that group was of course VMware, the company that introduced the enterprise to server virtualization. Today, it has taken residency in the hybrid world between the on-premises data center and the cloud. Armed with broad agreements with AWS, VMware finagled its way to be a key bridge between on prem and the monstrously popular Amazon cloud. IT pros used to working with VMware would certainly be comfortable using it as a cloud control panel as they shifted their workloads to AWS cloud virtual machines.

In fact, speaking at a press conference at AWS re:Invent earlier this month, AWS CEO Andy Jassy said the partnership with VMware has been really transformational for his company on a lot of different levels. “Most of the world is virtualized on top of VMware and VMware is at the core of most enterprises. When you start trying to solve people’s problems between being on premises and in the cloud, having the partnership we have with VMware allows us to find ways for customers to use the tools they’ve been using and be able to use them on top of our platform the way they want,” Jassy told the press conference.

The two companies also announced an extension of the partnership with the new AWS Outposts servers, which bring the AWS cloud on prem where customers can choose between using VMware or AWS to manage the workloads, whether they live in the cloud or on premises. It’s unclear whether AWS will extend this to other companies’ hardware, but if they do you can be sure Dell would want to be a part of that.

Pivotal’s key role

But it’s not just VMware that Dell had its sights on when it bought EMC, it was Pivotal too. This is another company, much like VMware, that is publicly traded and operates independently of Dell, even while living inside the Dell family of products. While VMware handles managing the server side of the house, Pivotal is about building software products.

When the company went public earlier this year, CEO Rob Mee told TechCrunch that Dell recognizes that Pivotal works better as an independent entity. “From the time Dell acquired EMC, Michael was clear with me: You run the company. I’m just here to help. Dell is our largest shareholder, but we run independently. There have been opportunities to test that [since the acquisition] and it has held true,” Mee said at the time.

Virtustream could also be a key piece providing a link to run traditional enterprise applications on multi-tenant clouds. EMC bought this company in 2015 for $1.2 billion, then later spun it out as a jointly owned venture of EMC and VMware later that year. The company provides another link between applications like SAP that once only ran on prem.

Surely it had to take all the pieces to get the ones it wanted most. It might have been a big price to pay for transformation, especially since you could argue that some of the pieces were probably past their freshness dates (although even older products bring with them plenty of legacy licensing and maintenance revenue).

Even though the long-term trend is shifting toward moving to the cloud, there will be workloads that stay on premises for some time to come. It seems that Dell is trying to position itself as the hybrid/private cloud vendor and all that entails to serve those who won’t be all cloud, all the time. Whether this strategy will work long term remains to be seen, but Dell appears to be betting the house on this approach, and today’s moves only solidified that.

Jul
02
2018
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Dell will soon be a public company (again)

Dell, which went private in one of the the largest leveraged buyouts in tech circa 2013, announced today that it will once again be going public through a relatively complex mechanism that will once again bring the company back onto the public markets with founder Michael Dell and Silver Lake Partners largely in control.

Dell’s leveraged buyout largely marked the final page in the company’s storied history as a PC provider, going back to the old “dude, you’re getting a Dell” commercials. The company rode that wave to dominance, but as computing shifted to laptops, mobile phones, and complex operations were offloaded into cloud services like Amazon Web Services, Azure and Google Cloud, Dell found itself navigating a complex environment while having to make a significant business transition beyond the PC era. That meant Dell would be beholden to the whims of public markets, perhaps laden with short-term pessimism over the company’s urgent need to find a transition.

The transaction is actually an offer to buy shares that track the company’s involvement in VMWare, converting that tracking stock into Dell Technologies stock that would mark its return as a publicly-traded company. Those shares will end up traded on the NYSE, around five years later after its founder took the company private with Silver Lake Partners in a deal worth roughly $25 billion. Silver Lake Partners owns around 24% of the company, while Dell owns 72% and will continue to serve as the chairman and CEO of the company. This move helps the company bypass the IPO process, which would remove the whole time period of potential investors scrutinizing the company (which has taken on a substantial debt load).

Dell said in its most recent quarter it recorded revenue of $21.4 billion, up 19% year-over-year, and over the past 12 months the company generated $82.4 billion of revenue with a net loss of $2.3 billion. The company said it has also paid down $13 billion of gross debt since its combination with EMC back in 2016. All this has been part of the company’s transition to find new businesses beyond just selling computers, though there’s clearly still demand for those computers in offices around the world. As it has expanded into a broader provider of IT services, it’s potentially positioned itself as a modern enterprise tools provider, which would allow it to more securely navigate public markets while offering investors a way to correctly calibrate its value.

Sep
07
2016
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$67 billion Dell-EMC deal closes today

dell-emc Last Fall, rumors began circulating that Dell was interested in acquiring EMC. On October 12th, the rumors proved true when Dell announced it was buying EMC for an astonishing $67 billion, a record price for a tech acquisition. Almost a year later, for better or worse (richer or poorer), that deal is official today. While the parties might like to frame this as a deal with little drama, the… Read More

Jun
20
2016
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Confirmed: Dell sells software division to Francisco Partners and Elliott Management

Dell headquarters TechCrunch has confirmed that Francisco Partners and Elliott Management have agreed to acquire Dell’s software division.
Elliott Management, Francisco Partners and Dell issued a joint press release confirming the acquisition this morning.
Rumors about this acquisition were first reported by Reuters over night. The deal involves Quest Software and SonicWALL and could include other… Read More

May
09
2016
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Pivotal confirms Series C round is actually over $650 million

Paul Maritz from Pivotal Pivotal filed a Form D last week with the SEC, indicating that last week’s $253 million round was actually closer to $653 million. Where did the extra money come from? Well, existing investors EMC converted $400 million in debt to equity to account for the additional money recorded in the SEC form, according to a Pivotal spokesperson. It’s actually quite interesting that EMC, which… Read More

May
05
2016
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Pivotal scores $253 million Series C led by Ford on hefty $2.8 billion valuation

ford-edge Pivotal has a couple of new friends with big wallets. Today it announced that Ford and Microsoft were joining EMC, VMware and GE as investment partners on a massive $253 million Series C investment with a whopping $2.8 billion valuation. It’s not a coincidence that Pivotal has been working closely with Ford over the last year to help it in its own transformation from a car company to… Read More

May
02
2016
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Michael Dell reveals new branding scheme for the Dell-EMC conglomeration

Michael Dell in front of a Dell-EMC mainframe. Michael Dell today revealed the new names, and yes we are talking multiple names, for the artist formerly known as the Dell-EMC deal. EMC will be deprecated for the main branding Dell Technologies, but will live on for the enterprise brand Dell EMC while the client services business will be called Dell, Inc. according to multiple reports. Confused? I’m sure you’re not… Read More

Apr
08
2016
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Rumors swirl EMC wants to dump Documentum ahead of Dell acquisition

Two speaking under huge EMC banners. Rumors are flying today that to nobody’s surprise, EMC and by extension its new sugar Daddy Dell are looking to dump dowdy Documentum, the company’s enterprise content management product. It’s worth noting up front that in email to EMC asking for a comment on the story, a spokesperson had this to say: “Not commenting on speculation.” You can’t get much… Read More

Jan
27
2016
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EMC CEO Tucci Maintains Deal With Dell Still On Track To Close Later This Year

EMC Chairman Joe Tucci EMC CEO Joe Tucci, responding to an analyst’s question on this morning’s earnings call about the status of the Dell deal, let it be known in no uncertain terms that the deal is going forward as planned. Responding to a question (which starts at around the 39 minute mark) from Maynard Um of Wells Fargo, Tucci admitted that there has been a lot of noise about possible pitfalls in… Read More

Jan
08
2016
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EMC Confirms Layoffs As Cost-Cutting Measures Begin Ahead Of Dell Acquisition

EMC Headquarters Some EMC employees got some harsh news this week as anticipated layoffs have begun at the Massachusetts company. A company spokesperson confirmed the news, but declined to offer a specific number of affected employees. CRN first reported the news. At the end of last month EMC telegraphed the move when it filed paperwork with The SEC. At the time, the company indicated that it would… Read More

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