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, 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, 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.
More news below.
• Financial sector in focus this week
As earnings season kicks into its first real week of substantial results, the banking sector in particular will get a lot of attention from investors, as the five largest U.S. banks by market cap are all due to report their third-quarter results. Not much is expected from the sector, as earnings estimates have been cut in half from what was projected at the start of the year. What’s worrying observers? Trading revenue and possible weakness in activity from mid- and small-sized businesses. Reuters
• Glencore to unload copper mines
The world’s biggest mining and commodities trading group announced plans to sell two copper mines in Australia and Chile, part of Glencore’s plan to strengthen its balance sheet. The Swiss-based group has been moving fairly quickly to reduce debt amid worries that low prices for the company’s key commodities could make it difficult for Glencore to service its $30 billion net debt pile. Glencore is aiming to cut that figure by $10 billion. Fortune
• Warner’s mixed results
With the bomb of Warner Bros.’ fairy tale film Pan over the weekend, it has become clear that the studio is struggling when it comes to the big picture. Though it has released more movies this year than the other big five studios, Warner is only ranked #3 in the global box office for 2015. It has had far more success selling videogames, beating out established players like Electronic Arts and Activision Blizzard, with a commanding 20% market share in the videogame market. WSJ (subscription required)
• Texas sues Volkswagen
Texas has filed a lawsuit against VW and Audi of America, suits that stem from Volkswagen’s admission that it rigged hundreds of thousands of diesel-powered cars in the U.S. to beat emissions tests. The lawsuit against the auto brands cites breeches of the state’s consumer protection law, while a separate lawsuit alleges VW violated the state’s clean air laws. Other state attorneys general are also believed to be looking into VW’s alleged violations, so more state-level suits could be filed down the road. USA Today
Around the Water Cooler
• Tesla planning software upgrade
Telsa Motors is expected to debut a new software upgrade this week which will include autopilot features for its Model S sedan. CEO Elon Musk made the announcement via a tweet over the weekend, and then answered some questions about the new software. While the features won’t turn the car into a completely driverless experience, it will help steer the vehicle on the highway and also help parallel parking. Fortune
• Hulu to debut VR app
Video streaming service Hulu is reportedly planning to unveil a virtual reality app next month to coincide with the release of a $99 Samsung VR headset. There are also plans in the works to develop projects that are specifically tied to the virtual reality experience. Though VR isn’t yet mainstream, Hulu and some top competitors are experimenting with VR. Netflix, Vimeo and TiVo have all either announced VR-friendly apps or are reportedly working on developing software in that space. Fortune
• Airports want to become hotels
We can’t imagine spending any additional time at an airport. But some major airports are angling to give travelers a reason to stick around longer, mainly by announcing plans to build hotel complexes. Within the past 16 months alone, several airports, including major hubs in San Francisco, Minneapolis-St. Paul, Baltimore-Washington and NYC’s Kennedy International Airport, have announced plans to built on-site airport hotels. The idea is not just to serve stranded passengers and flight crews, but a broader customer base. New York Times (subscription required)
5 things to know this week
Democratic debate, retail sales, and bank earnings — 5 things to know this week. This week’s story can be found here.