Dell Closes $60 Billion Merger with EMC

ENLARGE

Dell completed its acquisition of EMC Technologies on Wednesday. Photo: European Pressphoto Agency

Dell Inc. Wednesday said it completed its $60 billion deal to acquire EMC Corp., the largest technology merger in history.

The new company, to be named Dell Technologies, aims to be a one-stop shop for information technology sold to business. The company employs about 140,000 people globally and will maintain operations in Hopkinton, Mass., where EMC was located. With $74 billion in revenue, Dell Technologies will be the world’s largest privately controlled tech company.

“With the supply chain that we have and the go-to-market strength and the scale, we feel very well positioned both in the new areas of technology and in the existing areas of technology today,” said Dell Technologies CEO Michael Dell in an interview.

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As the corporate computing market shifts to newer technologies and cloud services, Mr. Dell said he anticipates consolidation in the market for conventional servers and storage hardware. “We know how to win in consolidation,” he said, adding, “we’ve proven that and we’re going to prove it again.”

The deal, announced Oct. 12, took nearly 11 months to complete. Dell and its partner investment firm Silver Lake raised more than $40 billion in debt. The company also brought in more than $5 billion through agreements to sell its IT-services business and software divisions.

The merger was extraordinarily complex. Dell, which is privately held, purchased not only EMC but its Byzantine federation of wholly and partially owned subsidiaries. Those include cybersecurity firm RSA Security LLC, software-development company Pivotal Software Inc., cloud-software company Virtustream and virtualization software vendor VMware, which will remain public.

VMware Wednesday said that Mr. Dell had been elected to the board of directors as chairman. In addition, Egon Durban was also elected to the board of directors. Joseph Tucci, VMware’s chairman since 2007, and John R. Egan resigned from the board.

The deal gives current EMC shareholders a tracking stock for VMware shares. Consequently, the privately held Dell has again begun to file quarterly financial reports to the U.S. Securities and Exchange Commission. The company had already filed quarterly reports to qualified debt investors.

Still, Mr. Dell said that away from the pressures of Wall Street to deliver quarterly earnings improvements, the new Dell Technologies will have the freedom to invest in newer technologies such as the Internet of Things, the evolution of cloud computing, cybersecurity and predictive analytics. “Those are all attractive areas for us to invest in,” he said.

Round Rock, Texas-based Dell on Tuesday reported that its revenue for the three-month period ending July 29 increased to $13.05 billion from $12.98 billion a year earlier. Overall, Dell narrowed its losses from continuing operations to $264 million, compared with a year-earlier loss from continuing operations of $292 million.

The merger between Dell and EMC is a response to overall declining markets in both Dell’s and EMC’s core businesses as technology shifts to mobile devices and toward lower-margin hardware such as servers and storage used in cloud computing.

PC shipments fell 9.8% in 2013, 10.4% in 2015 and are expected to drop another 7.3% this year with $161 billion in sales, according to International Data Corp. The $64 billion market for servers, storage and network hardware has been falling since 2014 and is expected to slide 1.3% annually for the next four years.

Combining Dell and EMC gives those companies an opportunity to take advantage of complementary strengths in sales. Dell, which ranks third in international PC sales, according to IDC, traditionally has appealed to smaller and midsize companies. EMC, IDC’s No. 1 storage vendor by sales, has made inroads in large enterprises.

Together, the two companies can presumably sell far more of Dell’s products to EMC’s customers, analysts say.

The deal had been near completion for weeks and Dell was waiting for regulatory approval from China’s Ministry of Commerce, which it received on Aug. 30. Previously Dell had obtained antitrust clearance from regulatory agencies in the U.S, the European Union and several other jurisdictions.

EMC shareholders received $24.05 a share in cash, in addition to a newly issued tracking stock linked to a portion of EMC’s economic interest in the VMware business. Based on the estimated number of EMC shares outstanding at the close of the transaction, EMC shareholders are expected to receive approximately 0.111 shares of the new tracking stock for each EMC share.

Write to Rachael King at rachael.king@wsj.com