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Dell and EMC customers like the idea of a Dell/EMC merger and largely plan to spend more with the combined companies, according to analyst outfit the Enterprise Strategy Group (ESG). The firm surveyed “202 senior IT decision makers at organizations that currently purchase from Dell and/or EMC Federation companies”. Of that …

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  1. Charlie Clark Silver badge

    Business logic versus finance

    No doubt there's some business logic behind the consolidation: it's easier to buy all the bits for a data centre from a single supplier. But then there's financial engineering behind this deal. The debt behind this deal is staggering and it's difficult to see it ever being repaid through increased sales. VMWare is where the value is and the tracking stock looks very much like a tax avoidance vehicle with the takeover merely show.

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    1. Anonymous Coward
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      Anonymous Coward

      Re: Business logic versus finance

      "But then there's the financial engineering behind this deal. The debt behind this deal is staggering..."

      @Charlie Clark, the financial engineering is brilliant if you do the maths. It's been widely reported that Dell needs to finance $40B. Assume a 10% interest rate to keep it simple; or $4B a year in interest.

      Currently, EMC annually pays out $3.5B in dividends and stock buy-backs. But to pay out that $3.5B, EMC pays the US taxman $1.4B, assuming a marginal rate of 40%, and forgetting the state taxmen for the sake of argument.

      So compare $4.9B annually for dividends, stock buy-backs, and taxes, to $4B in interest, and you see $.9B for additional R&D, SG&A, or price cuts to win deals.

      So that "staggering debt" comment in the media is simply wrong-headed jealous competition FUD [we didn't think of it first].

      But, what this deal highlights is the dysfunction of the US Corporate Tax Laws. Pay a dividend, it's a profit, and pay 35% to 40% income tax. Pay interest, it's an expense and a tax deduction.

      At the end of the day, this type of a deal has got to drive all those "tax the greedy corporations", Wall Street Occupiers, and libs crazy. And the financial engineers deserve a bonus.

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  2. Anonymous Coward
    Anonymous Coward

    As a VCE-er, the feeling in the air is far more positive than many expected.. nice place to be in for the moment.

    Anon for obvious reasons.

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  3. Anonymous Coward
    Anonymous Coward

    As a Dell and VMWare shop..

    I'm happy to see any change that can help consolidate our costs, but its got a real downside, as I would always play Dell vs EMC when purchasing storage! So it removes that card from the table.

    Additionally we're looking at a large infrastructure refresh next year, initially our decision would have been simple - EQL or more likely Compellant.. Whilst Dell is denying this, I suspect at some point in the next couple of years, 1 or both is going to bite the dust, same as with Dell's DR4xxx or the Data Domains, as there is a lot of product overlap.

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  4. CPU

    So, before you could buy storage from EMC, Servers from Dell, Virtuals from VMware. After the merger you can buy storage from EMC, Servers from Dell, Virtuals from VMware. All three worked together before, all three still work together - although EMC\ VMware never technically worked as well as it should have.

    The point of merger is what? A cynic might say that Michael Dell bought EMC\ VMware to ensure the DELL name continues into the virtual world (let's face it, the jewel in the crown is VMware).

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