Now that Dell has absorbed EMC and changed its name to Dell Technologies, the CEO of its major competitor is out drumming up fear, uncertainty, and doubt about the new venture.
Hewlett-Packard Enterprise Meg Whitman game out with guns a-blazing against Dell on CNBC’s “Squawk on the Street” on Wednesday, saying (emphasis ours).
“I believe we are going to win because what’s happening now is technology is moving at lightning speed and my view is the next five years is going to belong to the nimble, the fast, and the focused. So the contrast with Dell could not be more stark. They are getting bigger, we’re getting smaller. They are leveraging up, $60, $70 billion of debt on the balance sheet, we now have $5.5 billion of net cash on the balance sheet. We delivered. We’re leaning in to new technology. They’re doubling down on old technology and a cost takeout play. More of a private equity play really. Which might be good for the senior leadership team, for him, but I don’t know about customers.”
As Meg Whitman tries to shrink HPE in a series of deals where she spins out large chunks of the company into new ventures with partners that HPE partially owns, Dell CEO Michael Dell went the opposite and more traditional way.
He vastly expanded his company by acquiring another tech giant, spending $67 billion on the deal — the largest tech merger in history — with all debt and financing such a deal includes.
The two companies have always been rivals, but now they compete head-to head in just about every computer hardware market imaginable.
Whitman has made the same debt argument many times before. On the first day that Dell announced its plans to acquire EMC, she sent an email out to the HPE troops, when Dell’s debt for the deal was estimated at $50 billion, telling employees:
“To pay back the interest on the $50 billion of debt that the new combined company will have on their balance sheet, Dell will need to pay roughly $2.5 billion a year in interest alone. That’s $2.5 billion that they will allocate away from R&D and other business critical activities.”
But it’s also worth noting that buying EMC was also reportedly part of Whitman’s own game plan at one point. HPE is still struggling to produce top line growth. She was in discussions to buy EMC but the deal fell through when the two couldn’t agree on price.
Shortly after that, Whitman opted to break Hewlett-Packard into two companies and she’s been shrugging off other business units in this shared-equity spin-off model ever since.
In May she announced that HPE was divesting itself of its struggling consulting unit, firing up a partnership with one-time rival CSC to form a new company.
On Wednesday she doubled down on that, spinning out HPE’s software unit into a new company with Micro Focus, in a deal valued at $8.8 between the 50.1% equity HPE retained in the new company and a $2.5 billion cash payment to HPE.
As for Michael Dell, he’s been known to throw shade at HPE and Whitman, too, by implying that his rivals can’t “shrink their way to success.”
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