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EMC, HP blockbuster 'merger' shocker comes a cropper

Stand down, FTC... you can put your feet up for a bit

Joe Tucci EMC

+Comment EMC has been holding secret merger talks with HP that have since stalled, according to industry sources.

The negotiations are said to have lasted almost 12 months, during which Dell executives mulled buying parts of EMC. But at the heart of the discussion was a proposed $132bn merger of the storage giant and HP, according to people whispering to the Wall Street Journal and others.

Two background issues that may have encouraged those merger negotiations are the February 2015 retirement of overall EMC Federation CEO and chairman Joe Tucci, and the assault on EMC by activist investor Elliott Management, which seemingly wants VMware sold off and money returned to shareholders.

The EMC-HP consultations apparently considered a merger of equals with a stock transaction, with Meg Whitman as HP/EMC CEO and Joe Tucci as chairman. But these talks have finished with no positive outcome, reports said.

Comment

We could understand that HP's storage organisation might not relish a tidal wave of EMC products and people coming on board, as the 3PAR products compete directly with EMC's VNX and lower-end VMAX arrays. Also, the various HP object, backup and virtual SAN products all face overlap with equivalent EMC products.

Discussions with Dell are said to have involved Dell buying some EMC assets as well as a possible merger. The latter possibility was thought to be less likely given the disparity in size between Dell and EMC. There is also the problem of sorting out which storage products would have precedence with a set of strongly overlapping products, starting with Dell's Compellent and EqualLogic arrays going head to head with EMC'sVNX line.

EMC is being advised by JP Morgan Chase in the talks. Other potential merger/takeover partners could be Cisco and Oracle.

For Cisco, assimilating EMC's storage products would be easy as the only competing product is its Invicta all-flash array, which has not stirred the market that much.

From the point of view of Oracle, an EMC storage product infusion could look great. Oracle's Pillar line of SAN arrays would disappear while EMC would fit fairly nicely with the ZFS storage line. But would Oracle want to take on another hardware acquisition and start selling lots of products quite separate from the converged Oracle hardware/software engineered system/better together concept?

The Vulture's gut feel is that things are stirring in the jungle and we're going to hear more about EMC's future with its ideas being energised by Elliott Management's holding and influence. ®

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