EMC’s Joe Tucci has long been the smartest CEO in storage. While not every one of his bets has paid off, enough have done well, while the VMware $625M buy was a monster smash. Since VMware accounts for some 70% of EMC’s market cap, it is really the only deal that matters.
So what to make of his selling EMC to Dell? Another win for Tucci, turmoil for both EMC and Dell, and Dell and Silver Lake have been royally outfoxed.
Tucci has taken Dell to the cleaners. Dell bought a group of declining storage businesses (XtremeIO and – maybe some day soon – DSSD will help, but they’re small compared to the larger VMAX and VNX businesses), one highly profitable high-growth business (VMware), and promising but small Pivotal and Atmos businesses. I’ll be surprised if Dell/Silver Lake can hang onto VMware when interest rates start to rise and their debt load becomes a liability.
EMC’s core businesses are under long-term pressure from the cloud and from a host of startups whose modern technology is challenging EMC’s tired iron. EMC’s cloud initiatives are still in early days and, while promising, are also subject to intense competitive pressure from larger web-scale initiatives. The inevitable disruption due to the purchase won’t help these nascent cloud-related products either.
What Dell is getting – and what it sorely needs – is an aggressive executive team, deep enterprise experience, and a company big enough to change their parochial culture. If I were a Dell exec I’d be dusting off my resume because the EMC guys will be gunning for you.
What about everybody else?
HP, despite its current split up pains, will, on balance, gain due to the uncertainty around EMC’s post-sale product plans and sales and channel disruption.
IBM will continue its long-term retreat from hardware towards services (Cleversafe is the latest buy, and a good one for a services strategy), and won’t see much impact.
Oracle is niche-focused and may decide to broaden their storage portfolio – Sun’s was historically weak, and that hasn’t changed – by making an AFA buy.
Cisco is the big question mark. They could easily buy NetApp, but NetApp is grappling with years of poor product strategy. How does the new CEO prioritize growing the UCS business against the other challenges they face?
HDS continues to quietly reposition themselves and while they’re too quiet, their strategy is sound.
The startups – including Pure, Nutanix, Nimble, Infinidat and others – will also gain, though Nutanix may lose Dell’s support in favor of Atmos. OTOH, Nutanix may clobber Atmos. Stay tuned!
The StorageMojo take
Tucci made a great deal for EMC stockholders – and for himself. He’ll get to continue to run EMC for a few more years, and without the hassles of quarterly reporting and insurgent investors he’ll be having a lot more fun.
The larger issue is whether the industry needs another hardware heavy enterprise IT company. The pendulum swung towards the big guys when a “best of breed” buying strategy led to unsustainable integration costs. But now that everything IT is based on one processor, two operating systems, a couple of databases and one network – with cloud vendors handling spikes and many new tools – it is now feasible for enterprises to buy modern best of breed products with features the Old Guard can’t match.
In any case, EMC will have a bigger impact on Dell’s culture than the reverse, and that could be a very good thing for Mr. Dell.
Courteous comments welcome, of course.