Reports: Dell Purchase of EMC Hits Snags

Is the "Stop the presses!" Dell buyout of VMware parent EMC in trouble? That's what some media outlets seem to think.

As pretty much everyone in the IT world knows by now, last October Dell pledged to buy storage titan EMC for $67 billion. EMC's crown jewel is VMware, which has become the crown jewel at least partially because it continues to operate independent of its owner. EMC has been hands off, and that's just the way VMware likes it. (Whether that same laissez-faire attitude will continue under Dell was the subject of a December cover story in Virtualization Review magazine.)

The site Seeking Alpha reported yesterday that financing for the mega-merger could be coming off the rails. It cited, among other factors, a New York Post story claiming that Dell's having trouble selling off Perot Systems to raise cash for the deal, and the banks helping to raise more of the $45 billion needed are also facing difficulties.

Technology analyst and writer Kurt Marko saw the news, and Tweeted out his skepticism as well:

Seeking Alpha also noted that although Dell still believes the deal will go through, that there is a $4 billion "breakup" fee it will owe, if things fall apart. That isn't small change for any company, and will certainly motivate Michael Dell to get this thing done.

I won't speculate on whether or not the merger's in trouble, mainly because I don't have enough information to make that determination. I do know that the deal is nightmarishly complicated, in part because Dell's a private company (now), while VMware remains a public company.

In the cover story referenced earlier, some analysts speculated that Dell could raise money for the acquisition of EMC by selling off VMware. That would be true if Dell doesn't see the same product synergies for VMware that it obviously has with EMC, and how desperate it becomes to make the deal a reality. Whether that's the case or not, again, I have no inside knowledge.

But if the tech market doesn't bounce back quickly, or gets even worse, it's possible Dell will need to look at alternatives to raise enough scratch to buy EMC. Things could get very interesting this spring and summer.

Posted by Keith Ward on 02/12/2016 at 10:09 AM