EMC's sale to Dell would set record at $67B; jobs picture uncertain

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In an enormous acquisition involving a key Central Massachusetts company, Dell Inc. said Monday it plans to buy EMC Corp. for about $67 billion.

Hopkinton-based EMC – long a staple of that community and by any measure one of Massachusetts’ most important businesses – is a data-storage powerhouse that has lately struggled to find its place in the fast-evolving sphere of cloud-based computing.

The Dell-EMC combo, which will retain EMC subsidiary VMware, will be the most expensive technology merger in history when the deal closes. That is expected to occur in the next six months to a year.

The takeover's $67 billion price tag soars above the current record-holding tech buy: the $25 billion Hewlett-Packard paid for Compaq Computer in 2002.

Locally, the deal will be watched for its effect on another number: jobs. EMC, which is multinational, employs well over 9,000 in the Bay State, and for Central Massachusetts residents is second only to UMass Memorial Health Care in the number of positions it provides.

Texas-based Dell is making the purchase together with its owners: Michael S. Dell, chairman and CEO of Dell, investment adviser firm MSD Partners, and technology investment company Silver Lake.

In a conference call from Hopkinton with industry analysts and reporters Monday, the Dell CEO answered a Boston Globe columnist’s question about the impact on Massachusetts. Michael Dell said his company is “planning to put our server business into the EMC enterprise data center business,” bringing the Hopkinton facility's revenue to a $30 billion-plus business.

That means, he said, that “the region becomes more important for technology … This will mean great things for this area.”

He added: “EMC has had a fantastic history of working with the community. At Dell we have very similar programs. I’ve studied what EMC has done. We absolutely want to continue all of that.” Michael Dell also said that in keeping with the nature of a modern, global company, with “great teams” in place in Austin, Silicon Valley, Hopkinton and many other places around the world, “We’re not actually going to move a whole lot of people around.”

However, he did not rule out job losses, saying in response to a question from a Bloomberg reporter that there would be “cost synergies” and other moves as part of the normal course of business, aimed at making the company strong, innovative and responsive to customers. But in a lighter moment he said: “I think there are some other companies in our industry that are maybe far better at reducing headcount than we are.”

Later in the conference call he noted that in the last six months, Dell has added about 2,000 new salespeople, saying that gives some insight into an advantage of a privately controlled structure: A company needn’t show a great return from its decisions within a 90-day financial quarter.

The merged company will take EMC private, as Dell has been since 2013.

Michael Dell will lead the combined company as chairman and CEO.

Joseph M. Tucci, chairman and CEO of EMC, will continue in those roles until the transaction closes, Monday’s joint statement from Dell and EMC said. Dell’s headquarters will remain in Round Rock, Texas, and the headquarters of the combined enterprise systems business will be located in Hopkinton, the statement said.

Tucci has been signaling for some time his intention to step down.

The merger announcement is a rather sudden development for the long-independent and homegrown storage giant, founded in 1979. A hint of the impending purchase came Thursday, when The Wall Street Journal carried a widely circulated story about Dell and EMC being in talks.

Several months ago, there were reports Hewlett-Packard was seeking to acquire the Hopkinton company.

Monday’s statement said the combined company will maintain VMware as an independent, and publicly traded, company. California-based VMware has been a contentious holding for EMC, with activist shareholder Elliott Management Corp. putting pressure on EMC for more than a year to spin off the cutting-edge maker of virtualization software.

That is one example of a rapidly reshuffling, and innovating, industry with the emergence of cloud computing.

Elliott Management said in a statement Monday that it "strongly supports this deal."

The cloud is at the center of what Tucci termed a “sea change” in data storage technology, during a webcast in July in conjunction with the company’s mixed second-quarter results.

The Massachusetts technology stalwart, which dominated the now fading on-premises data storage market, has been belt-tightening for several years, including some layoffs. In July, EMC lowered its expectation for the year to revenue of $25.2 billion. EMC also said this summer that it would reduce costs, including through jobs. The CEO projected $50 million in cuts in the fourth quarter of 2015 and $850 million less in expenses annually by 2017.

The statement from Dell and EMC said stockholders in EMC will receive $24.05 per share in cash, in addition to tracking stock linked to a portion of EMC’s economic interest in the VMware business.

EMC stock rose 49 cents, or 1.76 percent, to $28.35 Monday in trading on the New York Stock Exchange. VMware's stock, meanwhile, fell $6.38, or 8.11 percent, to $72.27. Tuesday, EMC stock was trading down 36 cents to $27.99 at 11:25 a.m. VMware stock was trading down $2.15 to $70.12.

During Monday’s conference call, Tucci said the acquisition by Dell was an exciting development.

“The times are changing,” Tucci said. “You’ve really got to think in terms of technology hubs. This new combined company will have three great major, major hubs in the U.S. So for sure there’ll be thousands of people in Austin, for sure there’ll be thousands of people in … the Silicon Valley, and for sure there’ll be thousands of people here in Boston.”

Michael Dell opened the conference call saying: "We’re combining two of the world’s greatest technology franchises, with leadership positions in storage, servers, virtualization and PCs, and bringing together leading capabilities in the areas of our industry’s most important growth vectors, including digital transformation, software-defined data center, hybrid cloud, converged infrastructure, mobile and security."

He continued: "This transaction also strengthens both companies in today’s increasingly competitive global marketplace."

Tucci said during the call that the industry has experienced "tremendous transformation," including a "very disruptive side where the older style of IT is being pretty quickly disrupted."

But on the other side of the coin, the EMC chief said the industry is "just incredibly rich with opportunities."