Michael Dell: 2008 Financial Crisis Delayed Dell EMC Merger

Dell Technologies CEO Michael Dell talks to CRN about the history and execution of his blockbuster $67 billion acquisition of EMC.

Dell Technologies CEO and founder Michael Dell said the market-shattering $67 billion acquisition of EMC by Dell in 2016 might have happened years earlier, but the 2008 U.S. financial crisis postponed the merger of the two IT titans.

“In 2001, we had created this alliance that we called Dell-EMC to bring EMC storage technology and Dell server technology together and it worked really well to the point where we were talking about combining the company in 2008-2009. But with the financial crisis in 2009, we couldn’t do that,” said Dell in an interview with CRN.

Dell said his company’s relationship with EMC took off in 2001, when Joe Tucci – who Dell had known since the 1990s -- was appointed president and CEO of EMC. Later that year, EMC and Dell formed a successful multi-year alliance by selling Dell servers together with EMC storage.

[Related: Michael Dell On AI Innovation, 5G And His Vision For Dell Technologies]

The two CEOs began privately discussing the possibility of merging together in 2008 but the Great Recession that year delayed any potential deal from moving forward, according to Dell.

Flashing forward to 2012, Dell was striving to evolve and transform his company by investing in new software capabilities which proved difficult due to “short-term” shareholders, he said.

“Why was it hard? I think among our shareholder base, there were short-term oriented shareholders and long-term oriented shareholder. I’ll represent the long-term oriented ones because I’m kind of the ultimate long-term shareholder,” said Dell. “If you go back and read the analysts’ reports at that time, they weren’t too excited about the new things that we were doing. They certainly weren’t as excited as we were. We thought that by becoming a private company again, we could accelerate the transformation.”

Despite concerns from shareholders, including activist investor Carl Icahn, Dell took his company private in 2013 with the goal of significantly investing in R&D, product innovation and sales. Dell said the plan worked out “extremely well.”

“After going private was done, I called Joe Tucci – I’ve known Joe a long time, way before he joined EMC, I met him in 1994 – and said, ‘Let’s re-explore what we talked about back in 2008-2009?’” said Dell. “So fast forward to 2014, I’m talking to Joe Tucci saying, ‘Hey lets re-explore this.’ Because I knew if we could combine the No. 1 in servers, the No. 1 in storage, the No. 1 in all things software-defined infrastructure – VMware – that you’d have the essential infrastructure company and an incredibly powerful juggernaut. It wasn’t a quick decision. We started that discussion with Joe and we worked on it for more than a year in secret.”

In October 2015, Dell unveiled to the world its plan to buy EMC. The deal closed nearly a year later in September 2016.

Prior to the Dell acquisition, solution providers said the messaging and culture across the EMC Federation – which included EMC, VMware, Pivotal and RSA -- was lacking clarity and comradery.

“I know EMC was struggling with the messaging of the EMC Federation and how they were going to get everybody to work together,” said Vinu Thomas, CTO of New York-based Presidio, a $2.8 billion Dell EMC partner ranked No. 23 on CRN’s 2019 Solution Provider 500 list. “I knew that [putting it] in the hands of somebody like Michael, that’s going to be an easy way to get this fixed. … It was a really brilliant move when he decided to buy EMC in 2016. The acquisition of EMC purely from a storage perspective was brilliant. But in my mind, the acquisition of EMC was all the more greater for the hidden gem of VMware.”

Dell said both the technical and operational integration between Dell and EMC took some time but turned out to be a huge success. “There was tons of technical collaboration, tons of new products created, tons of innovation, we combined the channel programs together and there was lots of growth,” he said.

The merger spawned the formation of Dell Technologies which is currently a $91 billion infrastructure giant leading the worldwide market in servers, storage and hyper-converged infrastructure.

The Round Rock, Texas-based company generated $4 billion in server revenue in the first quarter of 2019, up 9 percent year over year, leading the global market with 20.2 percent share, according to research firm IDC. Dell is now the worldwide leader in storage with nearly $3 billion in sales, capturing 22.2 percent market share in first quarter 2019. In the rapidly growing hyper-converged infrastructure market, Dell dominated in the first quarter by capturing 32.2 percent share, with hyper-converged sales of $587 million, up 64 percent year over year.

Dell reentered the public market late last year, debuting on the New York Stock Exchange on Dec. 28, 2018. For Dell Technologies’ recent first fiscal quarter 2020, the company reported $21.9 billion in revenue, up 3 percent year over year.

“So you put a plan out there, you execute behind it and do what you said you’re going to do – it creates a lot of momentum,” said Dell.