EMC/VMware Buy Out Rumours

Earlier this week a colleague of mine brought two articles to my attention…. The first was an article about “Why EMC may buy out VMware”, the second was a complete reversal – “Why VMware may buy out EMC”.

http://recode.net/2015/08/03/why-emc-may-soon-buy-out-not-spin-out-vmware/
http://recode.net/2015/08/05/emc-considers-a-buyout-by-its-own-subsidiary-vmware/

Interesting articles to read…..

 

EMC buying out the remaining stake of VMware and taking it in house has always been talked about! I don’t think a month goes by without someone within EMC suggesting this route of action.

In my opinion, EMC’s acquisitions have more often than not been really clever in leveraging emerging technologies (or plugging gaps in their portfolio) – Data Domain, Avamar, Isilon, XtremIO. Even the software acquisitions have been smart – Legato Networker, Documentum, VMware, TwinStrata, Virtustream. I was a bit surprised when EMC decided to offload 15% of VMware shares back in 2007 for an IPO, previous acquisitions had been completely absorbed by the corporation, but with VMware they decided to give them their own free rein and identity.

With the vast expansion into virtualisation and cloud technologies, EMC have probably realised that sooner or later software is going to be the way to go….. Software intelligence deployed on commodity tin! So it comes as no surprise that a so-called buy out is on the cards again.

The keen financiers amongst us will have noticed that VMware’s share price is significantly higher than EMCs ($86 compare to $26 as of market close yesterday), and that they account for almost 75% of EMCs valuation – which means any sort of VMware spin-out will severely weaken EMC as a corporation!

An EMC/VMware merger would obviously save them quite a bit in operating expenditure as there is probably quite a lot of overlap, it was reported cost savings if such a merger occurred could be up to $1bn. Not to mention it would allow EMC to reap the benefits of reporting on VMware’s earnings as their own!

 

However, whether EMC buys out VMware or vice-versa, I don’t hesitate to think that the end-user would be the most affected by such a merger.

Because VMware is its own entity, it offers virtualisation across heterogeneous hardware… any sort of merger would surely mean that there would be a shift towards favouring its own products – ie EMC storage, backup, etc. What would happen to VMware’s future R&D and partner relationships with the likes of NetApp, Cisco, HP, etc? Yes, a merger may bring closer ‘federation’ between EMC products and VMware, but it would have a detrimental effect to customers who don’t have EMC products. (Just look at how Oracle prefers its customers to run Oracle on Exadata – yes you can run it on other systems, but licensing is so complex!)

What about the products that overlap, Virtual SAN and ScaleIO being two products that immediately come to mind – they both compete in the Software Defined Storage market using local hard drives to create a storage pool. Then there’s RecoverPoint for VM against vSphere Replication and vCenter Site Recovery Manager, both are DR solutions. Another semi-competing product is EMC Storage Resource Manager and VMware vRealize Operations – both can do monitoring and reporting of virtual environments.

Whilst a merger sounds enticing to shareholders and both corporations, I feel that it’ll be end-users that lose out on the innovations that VMware brings without being shackled to one hardware vendor – I’m guessing some sort of legal guarantee has to be put in place to offer fair competition if such a merger was to occur.

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