Michael Dell is transforming his company with the acquisition of EMC.
Photo: Justin Sullivan/Getty
By Alan Murray
October 12, 2015

So it’s official: Dell is buying EMC, in a transaction just announced, for $67 billion – the second largest technology acquisition ever. (The disastrous AOL-Time Warner merger in 2000 still takes top honors). There is much to unpack here, and we will be following up all day on Fortune.com, but here are some high-level highlights:

 

–Michael Dell is transforming Dell from a consumer electronics company into a massive business equipment and services company, designed to help other companies navigate the new industrial revolution.

 

–He is doing this as a private company, free from the pressures of quarterly earnings and activist investors. Anyone who has talked to Dell in recent years has witnessed the huge smile on his face when he discusses the joys of being private. In his view, this transformation couldn’t have happened in the public markets.

 

–He is doing this at a time when other technology companies – H-P (HPQ), eBay (EBAY) – are splitting apart, or are under pressure to split apart. Companies are splitting for two reasons – to satisfy investors who want more focused investments, and to allow for more focused management. As a private company, Dell doesn’t have to worry about the first. And in acquiring EMC, he is also acquiring CEO Joe Tucci’s “federation model,” designed to allow different business units to operate independently.

 

–In addition to an awful lot of money, Tucci would get two things out of this deal — an escape from activist investor Elliott Management, which has been pushing for changes at EMC (EMC), and a successor in Michael Dell.

 

–Silver Lake emerges from this transaction as a new kind of private equity firm, willing to make a massive bet on a private “platform” company, with no clear plans to exit by either selling it or going public. If you haven’t already seen it, watch Adam Lashinsky’s interview with Silver Lake’s Egon Durban at this year’s Brainstorm Tech here, in which Durban foreshadows this deal.

 

–In addition to Dell, Durban and Tucci, the other person who deserves credit for the deal is Janet Yellen. This will require massive amounts of debt, now available at low interest rates.

 

And a Saturday post script: Dow’s Andrew Liveris emailed over the weekend to protest our portrayal of the Ex-Im Bank as primarily benefiting big companies. He pointed to a Dow joint venture, the Sadara Chemical Company, that received a $4.75 billion loan from Ex-Im. Liveris noted $3.8 billion of that was directly targeted to sourcing U.S. produced goods and services, much of it from small and medium sized enterprises.

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