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Is EMC ripe for the picking?

Dell doesn't seem to have the finances to move up the data center stack in one fell swoop, but Cisco does

March 18, 2011 06:00 AM ET

Computerworld - With EMC healthier than it's been in a long time, some industry observers believe it might be ripe for the picking by vendors looking to shore up their data center vertical stack of products.

In a conversation this week with Computerworld, Dell executives did not rule out the possibility that the company could purchase EMC.

Travis Vigil, Dell's executive director of product marketing for enterprise storage, would not speculate on whether the company would renew its reseller contract with EMC, which runs out in 2013, saying only that it would continue to care for its joint Dell-EMC customers.

Asked if EMC could be a target for acquisition by Dell, Vigil's tune changed, saying M&As in the "enterprise space" are very likely.

"Eight enterprise acquisitions in the last year. We've publically said acquisitions are part of our growth strategy and the focus has and will continue to be in the enterprise space," he said. "Specifics beyond that I can't say."

Most industry observers agree that EMC and Dell's 10-year-old reseller partnership is over once its latest renewal contract runs out in 2013. With Dell's purchase of midrange SAN vendor EqualLogic and high-end SAN vendor Compellent, co-opetition between the companies has shifted to straight-forward competition.

Further evidence of the rift between the companies came to light when EMC recently launched its its line of VNX arrays that combined file and block-level data storage, and EMC CEO Joe Tucci said in no uncertain terms that Dell would not be a reseller of them.

"If we were using a marriage analogy, I'd say they are pretty much officially separated with irreconcilable differences and they're waiting for divorce papers to be filed," said Brian Babineau, an analyst with market research firm Enterprise Strategy Group. "They have children that they'll continue to support, but at the end of the day, they're both going to pursue their own interests."

But Babineau doesn't believe Dell is a viable contender to purchase EMC because it doesn't have the finances to pull it off. Buying EMC would also create a substantial overlap in products, he noted.

"Logically, the assets that are most valuable to Dell and that are owned by EMC are VMware and RSA," he said. "Certainly you're not going to be able to carve those businesses out of EMC."

"But I've seen many things in this world happen, so if EMC was more affordable and Dell had access to the capital, you never know," Babineau continued.

Dell's low market capitalization, only $27 billion, hardly puts it in a financial position to purchase EMC, even if the company did report $61 billion in revenue last year; EMC reported $17 billion.

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