Computer maker has stumped up $100 billion for a company that gives it a foothold in cloud computing
As expected, US computer maker Dell has found a vast amount of money and bought enterprise storage company EMC for US$67 billion ($100 billion). Well, hopes to buy, because there's a possibility some other suitor will offer EMC an even sweeter deal than Dell over the next twomonths.
That's the biggest tech deal ever: it's not far off half New Zealand's gross domestic product, which apparently hit just under $230 billion last year. If the deal is finalised, it would create an entity, run by Michael Dell, which today has combined revenue of US$75 billion and more than 200,000 staff worldwide.
The two companies have been close in the past, having had a partnership meant to last a decade but which ended two years early in 2011 - and strangely enough, EMC has been on the Dell (the company) shopping list since 2002, but any deal has been blocked by Michael Dell (the founder).
Several justifications have been bandied about to explain why Dell is prepared to spend such a huge amount on EMC. The best one seems to be that borrowing money is really cheap and there's plenty to go around, as demonstrated by the amount put on the table by Dell.
Although money's cheap, the US$50 billion debt that Dell's taking on to buy EMC will apparently cost US$2.5 billion to service in annual interest charges alone, as competitor Hewlett-Packard's chief executive Meg Whitman gleefully estimated in a morale-boosting email to employees.
Dell is buying data storage company EMC in a deal valued at approximately $67 billion. Photo / AP
Essentially, the deal is a huge but stagnating PC maker from the 80s trying to figure out how to make money in the post-PC era through buying a data centre storage specialist with the hope of getting a foothold in cloud computing.
If the deal proceeds, it will create a huge conglomerate, but in 2015 the new company will have its work cut out to remain relevant in a world that's about mobility supplied by Apple, and cloud computing delivered via Amazon Web Services (AWS).
That's tougher than tough competition, and now Microsoft has joined in on the client side with some desirable devices like the Surface Book.
The cloud side of things isn't going to be any easier either.
AWS has started going beyond providing infrastructure - the cloud computing and data storage features used for running programs - to renting out end-user software applications for productivity and business intelligence directly to enterprise customers.
You can run your apps directly in the AWS cloud, without servers even, using the Lambda feature, and more new products and improvements are added almost daily.
What's more, AWS can do everything at a massive scale and pace that giants like Microsoft and Google are struggling to match.
Although there are scenarios where AWS isn't a good fit - and it can be a struggle to figure out the right options and size them properly, or scale them up and down as needed, so you don't pay too much - businesses everywhere are being seduced by the cloud mantra.
Part of the appeal of cloud computing is that you don't have to care what hardware your computing is done on as long as it does what it's supposed to.
Masses of white-labelled devices directly from Far East makers, designed by them or the customers themselves, is what web-scale companies like AWS, Facebook, Microsoft and Google want.
EMC should probably grab Dell's billions before that reality sinks in.
