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Will the Dell-EMC merger spur growth?

Posted: 13 Oct 2015     Print Version  Bookmark and Share

Keywords:synergy  cloud  enterprise  server 

As two hardware companies announce their merger, industry watchers are divided as to whether or not the deal is a good move.

Dell's $67-billion bid to buy storage giant EMC draws attention to a consolidating industry, where companies buy rivals in order to drive growth. While such a move is expected in an evolving market, one question remains in everybody's mind: Is it a good deal?

Timing is one thing to consider in judging the merits of the pending acquisition. The announcement came as PC sales, the main driver of Dell's revenues, continue to plummet with slow demand among enterprises and consumers.

Gartner reported a 7.7 per cent decline in PC shipments in the third quarter compared with the same period last year, while IDC projected it at 10.8 per cent year-over-year.

As mobile devices continue to challenge the PC market, the world's third-largest computer maker intends to use the deal as a way of diversifying its portfolio. By combining its server businesses with EMC's storage and virtualisation expertise, the new company will be able to offer a wider range of products in various applications such as cloud computing, mobility and cyber security, according to a Reuters report.

As such, Dell will be in a better position to challenge its rivals Hewlett-Packard and IBM, which are also succumbing to market pressures. Last year, HP announced it is splitting into two smaller companies, one for PC/printer and another for servers. On the other hand, IBM sold its microelectronics business to GlobalFoundries earlier this year and its x86 PC and server businesses to Lenovo.

However, not everyone is convinced that this deal will help spur Dell's growth. For one, an integration as big as this can be "distracting and confusing and can take a lot of time," Steve Herrod, VMware's former CTO, said in a Wall Street Journal report.

- Stephen Padilla
  With inputs from Rick Merritt and Vivek Nanda

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