9.23.2014

Will win the EMC prize?



EMC Stock Soars After Investors Learn About Mega-Merger Talks With HP, Others

Excerpt:


For nearly a year, EMC and HP have been kicking the tires on a merger that would have created one the biggest enterprise tech companies on the planet — with over $130 billion in annual sales, according to the Wall Street Journal. For comparison, IBM is expected to do $98 billion in annual sales this year. Apparently, the talks have stalled because they couldn't agree to terms. Both companies were concerned they couldn't sell the deal as it was to shareholders, reports the WSJ. ... The WSJ said EMC was talking to Dell about a merger, which may have involved just selling parts of itself off. Dell is working hard to get a piece of EMC's enterprise storage business. This means that EMC is open to talks with others, too, with names like Oracle and Cisco being dropped to the WSJ and Barron's. Cisco would be interesting match with EMC. The two companies are close partners, but in recent years, EMC subsidiary VMware has been threatening Cisco with a new technology called "software-defined networking." SDN threatens Cisco's Cisco's $21 billion router/switch business with a new software-centric way to build networks. Everyone from Goldman Sachs to Facebook has jumped aboard the SDN bandwagon. Then again, HP, Cisco's main rival in the network industry, has been all-in on SDN. Owning EMC/VMware would be sweet for HP on that count. All this merger talk might amount to nothing, but EMC is at a crossroads. EMC's bread-and-butter technology, enterprise computer storage, is under attack from a whole slew of young new technologies that offer bigger, faster, and cheaper storage options — and from cloud computing.
Comment: HP has a disastrous record with acquisitions (detailed in the article). But this would be a merger - a stock swap. I think Oracle is a better match as Oracle has been somewhat moribund of late. So it could be good for Oracle. A dark horse is Seagate but Seagate's market capitalization is a fraction of EMC's. But it seems to me there is a natural synergy there.

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