As the biggest tech company in Massachusetts, EMC is both highly influential and much maligned. Tech startups in data storage and cloud services are gunning for its business. Entrepreneurs and venture investors say the company’s policies hurt the flow of talent in the innovation community. And despite its size and influence—think $50 billion market cap—most observers would say the company is struggling.
But other technology giants smell an opportunity. In the latest rumored industry mega-merger, Dell is said to be in talks to acquire Hopkinton, MA-based EMC (NYSE: [[ticker:EMC]]). The terms of the hypothetical deal are unclear—how would Dell finance such a big purchase, and would VMware or other divisions be spun off?
Round Rock, TX-based Dell went private in 2013 in a historic $25 billion buyout. The company also is no stranger to big New England deals: in 2007, Dell acquired New Hampshire-based EqualLogic for $1.4 billion in cash. (Word on the street is that EMC could have bought the company for far less, but passed.)
If the Dell-EMC deal goes through—a huge if at this point—it could greatly impact the storage and cloud industries, as well as the local ecosystem. Putting aside how the integration would happen, how many layoffs might result, and any antitrust issues, there is a wide range of opinions about what a merger would mean.
In the short term, it could delay any deals planned between EMC and local companies (partnerships, acquisitions, and so forth). Acquisitions have been a big part of the storage giant’s growth strategy, particularly in cloud-based technologies. In the past year or so, EMC has acquired such companies as Virtustream and TwinStrata.
A few Boston-area entrepreneurs are weighing in on Dell-EMC:
—Coach Wei, founder and chairman of Web optimization startup Yottaa (and an ex-EMC employee), writes in an e-mail: “The deal makes sense for Dell. As a former EMC employee, it’s much less exciting. Merging two aging weak companies rarely creates a big winning company. So it could be a sad outcome for both companies.”
He continues with some historical context: “In the high tech industry, in order to survive and thrive, one has to re-invent yourself from time to time. EMC itself is a good example on both sides. It re-invented itself from a computer memory company to a storage system company (by building and selling Symmetrix, EMC’s flagship hardware platform) in the late ’80s and early ’90s. This re-invention made EMC one of the most valued stocks in the market for almost 10 years.”
“Software was the 2nd major evolution for EMC, which happened in the late 1990s to early 2000s. (My first job was at EMC as a software engineer building EMC Control Center V1, EMC’s flagship software product line.) Unfortunately, since then, EMC has lost its product capability to re-invent itself (the biggest achievement for EMC in the last 10+ years isn’t industry shifting products, but the acquisition of VMware). Not being able respond to industry shifts is what is causing EMC’s dilemma today.”
Wei concludes: “Fundamentally, it comes [down] to corporate culture and leadership. Many of the Massachusetts companies operate in a ‘command and control’ culture. Many companies discourage entrepreneurship among employees and even go sue these employees who leave and go on to start their own companies. The culture and leadership need to change in order to achieve sustained excellence and breakthrough results.”
—Andres Rodriguez, founder and CEO of Nasuni (an EMC competitor in cloud storage), writes: “While this merger, if it happens, might help EMC with its short term investor troubles, it won’t help the company with its greatest long-term weakness: the lack of a strong cloud storage product. With file data growth at about 40% annually, enterprise IT can’t just keep buying and installing more boxes. Add in the immense pressure IT is feeling to give employees access to files from anywhere, from any device, and to enable sharing of files outside the firewall, and the only viable solutions is cloud.”
He adds, “Dell is a great company, and there are a lot of synergies that make sense for the present day, but concerning the future of storage, this merger would do nothing to help EMC in the cloud.”
About the startup talent pool, Rodriguez says: “In the short term, this deal would be a bonanza for Boston. For the past year, I’ve already seen a lot of good, solid talent with deep experience in channel marketing, product management, engineering and other domains leaving EMC. If this deal happens, after the consolidation, they’ll join growing Boston-area companies, which is great for our startups. The pity is that, long term, it’s a worrisome trend. We’re losing our training ground for startup talent. Seattle has Microsoft, Silicon Valley has Google and Apple. Without EMC, what do we have? Smart college graduates will go elsewhere for opportunities, hone their skills and then found the next generation of fast-growing technology companies in other regions.”
—On this issue of talent flow, Andy Palmer, co-founder and CEO of enterprise software startup Tamr, writes: “I think any change at EMC is a good thing—especially if it enables change in their policy with respect to enforcement of non-competes.”
