The Dell/EMC Merger Is Complete. What's Next?

By Pino Vallejo

Dell Technologies (DELL) wrapped up the acquisition of EMC Corp. in the largest technology deal in history, positioning the company to use its size to invest in new areas and fend off competition from the cloud and other rivals.

The combination creates a $74 billion business that serves 98 percent of Fortune 500 companies, Dell said in a statement Wednesday. It also takes EMC out of the glare of the public markets as the company is privately controlled.

The tie-up, valued at about $67 billion when it was first announced almost a year ago, brings together the leading provider of key storage products and one of the top makers of servers and personal computers as both companies grapple with rising interest in cloud-based services from rivals such as Amazon.com Inc., Microsoft Corp. and Alphabet Inc.’s Google. Dell Technologies plans to invest $4.5 billion a year in research and development going forward after cumulative investments of more than $12.7 billion over the past three years, according to the company.

“We’ve got the ability to innovate at scale and invest — not for next quarter, but we have the agility and speed of a startup, but the scale and reach of the largest company in the industry,” Michael Dell, chairman and chief executive officer of the company, said in an interview. “Being private gives us an ability to focus on our customers like no other competitor can.”

Dell plans to invest in areas including products linked to the Internet of Things — or the effort to connect various devices, from cars to refrigerators.

“As you have this instrumentation and making everything intelligent — that’s a huge opportunity,” Dell said. “The PC and smartphone revolutions have reduced the cost of microelectronics to the point where these small computers, effectively, can be embedded in anything.”

The new company has 140,000 employees. While Dell didn’t deny there could be job cuts, he said the tie-up was more about revenue growth.

“We have more, what I would call, revenue synergies than cost synergies because of the complementary nature of the businesses; we’re not putting together businesses that are the same — and taking costs out,” he said, declining to give any estimate for layoffs. “There are some overlapping functions and that sort of thing — that’s not the primary feature of this, but there is some of that.”

EMC shareholders will receive $24.05 per share in cash and a tracking stock linked to a portion of EMC’s economic interest in VMware Inc., its majority-owned software business. Shares of the tracking stock, which has the ticker “DVMT,” began trading Wednesday.

The merger comes a day after Dell Technologies reported its financial results for the quarter ended July 29. Dell said it had revenue of $13.1 billion from continuing operations, an increase of 1 percent from a year earlier. It also had operating income of $63 million, reversing an operating loss in the previous year.