Dell Buys EMC: What Happens to VMware Now?

So, Dell now owns EMC, and by extension, VMware. There is so much to say about this, even though so little is actually known.

What we do know is that the deal is done; announcements on both Dell's and EMC's sites have confirmed it. I can't even begin to understand the financials of how it will work, of how a private company buys a public company. And for me, that doesn't matter, at least in terms of the most interesting part of the deal for those of us whose main interest here is VMware.

EMC's Laissez-Faire Approach
What does matter most is this: what are Dell's designs on VMware? VMware has thrived, and EMC's misfortunes haven't been a drag on the virtualization giant. Most folks believe it's because VMware has retained its fierce independence, and EMC CEO Joe Tucci has been hands-off for the most part.

While VMware was part of the EMC "empire" -- the most valuable part, by far -- EMC recognized the wisdom of a laissez-faire approach. That approach paid off quite handsomely, as the bulk of EMC's value is derived directly from the fact that it owns VMware.

The big question, for me at least, is whether or not Dell will recognize this and be similarly flexible, letting VMware do its own thing. Michael Dell, Dell's CEO and founder, said something interesting in his short message about the merger: "Dell and EMC are both companies that have a demonstrated ability to win in fast-changing markets, and that will only accelerate from here."

Riding the Wave
That's only partially correct. EMC has not shown the ability to consistently win in those "fast-changing markets." VMware, on the other hand, has been much better at that. As I pointed out last week when these acquisition rumors were making the rounds, VMware has ridden the front edge of the technology wave. It's embraced things like software-defined networking, containers and hybrid clouds that aren't yet core technologies or big money-makers for it, all in the name of staying ahead of the curve.

With Dell soon to own VMware, will that change? Will Dell insist on micro-managing VMware, thinking it knows best? Or will it assert its power to force VMware to fall in line with its vision in areas where they clash? The answer seems obvious: why mess with a good thing? But it's happened before; egos get in the way, particularly in the technology industry.

It's almost certain that some layoffs and restructuring will accompany this move, as Dell decides what works in the "federation" of disparate companies that make up EMC and what doesn't. What it does with VMware will, in many ways, be the most important decisions it will make, and will shape the future of much of the tech sector.

Brave New World
Today is Columbus Day in America, when the discovery of the New World is celebrated. It's perhaps appropriate, therefore, that a new world is arising in this acquisition. Dell, EMC, VMware and the rest face an uncertain future, as did America in the early days. Their first few steps on the new continent will go a long way toward shaping their destiny.

Posted by Keith Ward on 10/12/2015 at 6:13 AM