Dell is dealing. The computer maker agreed Monday to buy data storage giant EMC Corp. for $67 billion, the largest tech takeover ever.
As the personal computer business declines, the complex deal would widen Dell’s product lineup and expand its corporate computing business, making it a dominant force in the $36 billion data storage industry.
Dell’s acquisition also bucks a trend in tech that has seen companies look to get smaller and more specialized. Dell rival HP, for example, is breaking itself into two companies. As such, the takeover may be a harbinger of further consolidation in among companies that produce tech hardware such as servers and networking equipment.
For now, though, HP took the opportunity to trumpet its strategy and the risks of Dell’s big acquisition. “This is a real opportunity for HP,” the company said. “Two of our largest competitors are attempting a highly distracting, multi-year merger, just as we are launching two new, focused companies. The massive debt burden Dell and EMC are taking on undoubtedly means that they will have to radically reduce R&D, and integration inevitably will create disruption as they rationalize product portfolios, channel programs, and leadership.”
Of course, Dell had made similar comments trying to win over customers last year when HP announced it would split. “Dell is singularly focused on its customers and partners and is committed to providing end-to-end IT solutions that they need,” a Dell spokesman told Bloomberg at the time. “HP’s decision to break apart its business is complex, distracting and appears to benefit HP and its shareholders more than its customers.”
As Dell tries to diversify its business and rationalize its strategy, it at least has the advantage of not facing day-to-day or quarter-to-quarter pressure from public markets. CEO Michael Dell took his company private two years ago in a $25 billion deal with financial backing from investment firm Silver Lake Partners. But giant tech deals don’t always work out. Here’s a look at the next 10 biggest tech mergers and acquisitions, based on transaction values from S&P Capital IQ.
1. Dell Buys EMC
Value: $67 billion
Date announced: October 12, 2015
How it worked out: It's much too soon to say. Can two struggling businesses re-emerge as one big tech power? Dell is making a huge, expensive bet on EMC.
2. JDS Uniphase Buys SDL Inc.
Value: $41.1 billion
Date announced: July 10, 2000
How it worked out: When the dotcom boom turned to bust, this deal stood out as a prime example of just how frothy the market had gotten. JDS Uniphase paid more than $40 billion for a company with annual revenue of less than $300 million. JDS Uniphase ended up writing off $44.8 billion — $44.8 billion! — in goodwill as a result of this and other acquisitions.
3. Hewlett-Packard Buys Compaq Computer
Value: $31.8 billion
Date announced: September 4, 2001
How it worked out: HP CEO Carly Fiorina doubled down on the personal computer business and lost, though shareholders and employees arguably lost much more. After years of struggling in a rapidly evolving tech market, HP has now decided its most promising opportunity is to split itself into two companies.
4. KKR Buys First Data
Value: $28.7 billion
Announced: April 2, 2007
How it worked out: Private equity firm Kohlberg Kravis Roberts & Co. bought payment processor First Data at the height of the pre-financial crisis buyout boom. Eight years later, First Data has filed to go public again in an IPO that would rank as the biggest of the year, potentially valuing the company at $18 billion and raising up to $3.7 billion.
5. Dell Goes Private
Value: $28.1 billion
Announced: February 5, 2013
How it worked out: Michael Dell says going private has been great, though his company must still forge a path toward long-term growth, as demonstrated by its purchase of EMC.
6. Lucent Buys Ascend Communications
Value: $20.5 billion
Announced: January 12, 1999
How it worked out: "That deal may go down in history as one of the worst," Andrew Ross Sorkin of The New York Times wrote recently.
7. Telecom Italia Buys Out Telecom Italia Mobile
Value: $20.3 billion
Announced: December 7, 2004
How it worked out: Telecom Italia (TI) stock was near $40 a share in December 2004. It's now just above $12. That has to do with more than this one deal, but long-term investors can't be thrilled with that performance. The stock has done much better since bottoming out in mid-2013 and is up about 17 percent over the last year.
8. Seagate Technology Goes Private
Value: $20 billion
Announced: March 29, 2000
How it worked out: The disk drive maker went public again in 2002, then considered going private yet again in 2010. It now has a market cap of $14.55 billion.
9. Facebook Buys WhatsApp
Value: $19.7 billion
Announced: February 19, 2014
How it worked out: It’s still too soon to say how this purchase will play out, but WhatsApp continues to grow and dominate among messaging apps globally, recently hitting 900 million monthly active users, and Facebook's Messenger app has roled out new Whatsapp-like features that have helped it grow to 700 million monthly active users. Just how Facebook turns those users into revenue isn't clear yet.
10. Alcatel and Lucent Merge
Value: $18.9 billion
Announced: April 2, 2006
How it worked out: Nokia agreed to buy the combined company in an all-stock deal initially valued at $16.6 billion earlier this year.
11. VeriSign Buys Network Solutions
Value: $18.8 billion
Announced: March 6, 2000
How it worked out: This was another dotcom bubble-era deal that went pop. VerSign wrote off $9.9 billion of its investment and would up selling part of the Network Solutions business, its Internet domain name registrar, for $100 million in 2003.