Dell is going back to its roots by rekindling its profitable relationship with EMC by striking a deal with the data storage company in hopes of boosting its profit and reestablishing itself as a computer giant in the technology market.
On Monday, the Round Rock, Texas-based computer technology company announced that it struck a deal with EMC, and it is certainly one for the books because the deal is worth $67 billion.
ComputerWorld noted that since their 10-year reseller partnership both worked out for them, it's just right that the struggling companies work side-by-side once again. However, they should also take note that the rivals they have back then as partners are not the same ones and have even grown in number.
The expensive deal between the two can hopefully improve Dell's sales since it is currently at a stagnant state in the market as the No. 3 computer maker in the world.
Dell is said to be looking at a way of making it big in the tech market by reaching beyond PCs since more and more of its rivals are currently boosting their mobile offerings.
The combination between Dell and EMC is hence expected to widen the range of the products they will be offering and give Cisco Systems Inc, Hewlett-Packard and IBM a run for their money in areas of cyber security, cloud computing and mobility, as per Reuters.
"I don't think either Dell or EMC were viable over the long run as a standalone; they really needed each other. Dell was mostly on the consumer side, which is a terrible place to be. EMC had some enterprise products, but not the complete package," Owen Graduate School of Management at Vanderbilt University dean Eric Johnson said.
Nevertheless, despite the more than generous deal, MarketWatch pointed out that there is a big worrisome aspect that Dell needs to deal with amid its plan to boost its profit, and it is the hefty debt it has incurred.
Dell plans to address its debt by cost-cutting and elimination of company duplications. It has since assured investors that it will be taking more than it could handle with these big moves.
"I think what you're going to see is in the first 18 months to 24 months, a significant de-leveraging coming from some cost synergies. We have revenue synergies that are three times larger," Dell said on a conference call.
Fortunately, with the massive deal that it has made with EMC, investors can easily track the merger's progress.
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