Dell Completes EMC Buyout, Channel Watches Closely

 
 
By Michael Vizard  |  Posted 2016-09-07 Email Print this article Print
 
 
 
 
 
 
 
Dell, EMC

While Sept. 7 might mark Dell Technologies' first official day as an entity that includes EMC, solution providers will find themselves dealing with multiple business units and organizations underneath what amounts to, for all practical purposes, a holding company.

The three main elements of Dell Technologies are a client division henceforth to be simply known as Dell; an infrastructure division that combines all EMC and Dell server, storage, networking and Virtustream cloud services into a single group; and VMware.

Underneath those three major groups, however, are a bevy of other product organizations that like the main division of that company are free to make their own industry alliances. They include RSA, Boomi, Pivotal and Dell SecureWorks.

Together, all those units represent a $74 billion behemoth. However, in practice, each business unit will pursue its own unique mission. There may be programs that, for example, combine offerings from the Dell and RSA units. But it's just as likely that Dell will partner with other security vendors, if and when necessary.

From a channel perspective, Dell has already made it clear that it will operate both the existing Dell and EMC channel programs side by side through the fiscal year ending Feb. 1. Dell Technologies has committed to unifying those programs. However, right now, those two channel programs are very different in that the EMC program limits where EMC sales people can directly engage. The Dell channel program is a much more fluid program in that Dell sales people have more freedom to engage customers directly as they see fit.

In addition, it's not expected for Dell Technologies to address any overlap in products between Dell and EMC in a meaningful way until the beginning of the new 2018 fiscal year.

One issue Michael Dell as CEO of Dell Technologies did try to lay to rest is how Dell Technologies would pay for this merger. Dell Technologies is now saddled with about $24 billion in debt. But Michael Dell made it clear that Dell Technologies would generate enough cash to pay down that debt. He said Dell Technologies is already generating three times the cash needed to pay down its debt. In fact, he noted that the company has already retired $5 billion of the debt it generated by going private in 2013.

Just prior to this announcement, Dell Technologies released financial results for the second quarter of fiscal 2017 showing operating income of $63 million, reversing a year-earlier operating, on a 1 percent gain in sales to $13.1 billion. This suggests aggressive cost-cutting measures are already under way inside Dell Technologies.

For solution providers across the channel, that debt issue is significant because it speaks to how aggressive Dell Technologies may need to be to generate sales to pay off that debt. If Dell Technologies sees the need to generate immediate cash, pressure on margins involving its products and services is likely to be high.

In the meantime, Dell notes that the world as a whole is on the cusp of a new industrial revolution that is being uniquely driven by IT technologies. That revolution, said Dell, will dramatically expand the overall size of the IT market as the number of intelligent objects and devices connected to the Internet expands exponentially.

How much of that market opportunity Dell Technologies can gather remains to be seen, given the fierce level of competition that exists across the IT industry. But given the sheer size of Dell Technologies, it's fairly assured that the company in at least one or more of its many forms stands to benefit.

Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications, including InfoWorld, CRN and eWEEK. He currently blogs daily for IT Business Edge and contributes to CIOinsight, Channel Insider and Baseline.

 
 
 
 
 
 
 
 
 
 

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