Redmond View
Big Deals Once Again Shift IT Infrastructure Landscape
The IT market leaders are vying for the top spot with strategic and massive acquisitions.
The IT industry has a storied history of major multibillion-dollar deals and often it's the shareholders who get rewarded the most. Now that Dell and EMC have finalized the largest merger ever among two IT infrastructure providers, the race is on to see if bigger is indeed better.
Michael Dell obviously believes that to be the case, which is why he and his investors have put up $67 billion to acquire EMC and its stake in virtualization giant VMware. Because of the fact that the company is no longer publicly held, Michael Dell believes it can better respond to the needs of its customers rather than its shareholders. Of course, that presumes Dell Technologies can meet its debt obligations, which so far it has done since its 2013 leveraged buyout. Nevertheless, as the saying goes, past results don't guarantee future performance, and the devil will be in the details.
Indeed, not everyone is sharing the view that bigger is better. Just as the Dell Technologies deal closed last month, its largest rival, Hewlett Packard Enterprise (HPE), the same week agreed to spin off a majority stake of the software assets it had amassed over the past decade to Micro Focus for $8.8 billion, divesting its application delivery management, Big Data, security, information management, and governance and operations management software businesses. This HPE spinoff comes less than a year after splitting off from printer and PC systems provider HP Inc.
The irony is just a few years ago, HP was the largest provider of IT infrastructure touting the benefits of offering PCs, printers, storage and network infrastructure and the economies of scale that came with it. Now we'll see if Dell's newfound scale -- and, likewise, HPE's narrower focus -- will work out better.
About the Author
Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.