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On Monday, October 11, the day before VMWorld Europe started, Dell announced its intention to acquire EMC for $67bn and make it a private company. As part of the financial engineering of this acquisition, VMware remains as a publically traded company, with Dell as its major shareholder.

VMware sees increased value for it as part of the deal

Pat Gelsinger, CEO of VMware, stated that for VMware, the Dell deal simply means that it goes from being owned by a company beginning with “E” to one beginning with “D” that is twice the size. Gelsinger continued to say that the deal would be worth an extra $1bn in revenues for VMware. Ovum understands that this increased revenue would be because Dell would be more incentivized to sell VMware technology as part of its deals, now that Dell it a majority share of VMware.

The other main point Gelsinger made about the acquisition from VMware’s perspective focused on the speed of decision-making. Gelsinger used the example of the VMware acquisition of AirWatch. Under EMC, the $1.5bn acquisition had to go to a special board for approval, while under Dell’s ownership, Gelsinger will only have to obtain Michael Dell’s approval. While the difference is subtle, the speed of getting a decision is an important aspect of any business. While a board may ensure deeper consideration and challenge for any proposal, getting a board together takes time, then getting a consensus from a board only adds to the time, which can alter the viability of a proposal.

Ovum believes that for VMware, retaining its independence is critical to it continuing to evolve and disrupt the market. For Dell, the VMware technology represents the glue that sticks together the infrastructure of the newly combined entity. Ensuring VMware’s growth is therefore a key element to the success of this deal.


Further reading

Dell needs to define the value of Services in EMC merger, IT0019-003501 (October 2015)

Dell-EMC deal creates sixth mega-vendor, IT0019-003502 (October 2015)


Roy Illsley, Principal Analyst, Infrastructure Solutions

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