Dell could spend $40 billion to merge with EMC and take over VMware

EMC Joe TucciEMCEMC CEO Joe Tucci

Dell is serious enough about a rumoured merger with IT giant EMC that it’s raising $US40 billion from the big banks to finance the deal, Bloomberg reports today.

EMC, a $US52 billion IT company that’s best known for its data center storage products, has a controlling stake in cloud computing software vendor VMware, a $US34 billion publicly-traded company in its own right.

Dell would take over EMC’s controlling stake in this deal, the report says.

Under this deal, Dell would take EMC private, but leave VMware traded on the public markets.

Dell itself delisted itself from the public markets and went back to being privately held in 2013. Dell could be preparing an offer of around $US27 per share for EMC.

Shares of VMware were down 6.24% at the time of writing, while EMC was up 5.37%.

This merger, if true, would be complex and costly to execute. But the payoff could mean that Dell gets a broader enterprise business, while EMC gets some breathing room after its recent troubles.

Dell, EMC, and VMware — which specialises in a technology called “virtualization” that helps companies make their data centres more efficient — have all been facing pressure from cloud services like Amazon Web Services, which lets customers outsource their data crunching and data storage needs to one of the e-retail giant’s hugely efficient data centres. In addition, Dell has reportedly been hit hard by the sagging PC market.

For its part, EMC has fallen on some hard times. Free software like Hadoop, which can be run on commodity servers, has seriously impacted EMC’s storage and data processing businesses, since it removes the need for customers to buy often-pricey software and hardware products.

EMC reportedly began a strategic review to explore various options last year. And over the summer, EMC vowed to cut $US850 million in expenses, prompting employees to start bracing themselves for mass layoffs.

Plus, long-time EMC CEO Joe Tucci was slated to retire in February 2015, but that didn’t happen. He has made no secret of the fact that he’s searching for his replacement, though a merger with Dell could solve that problem handily.

Neither Dell nor EMC has responded to Business Insider’s request for comment on a proposed merger.

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