Is Dell-EMC The Canary In The Coal Mine For More Enterprise M&A?

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When Dell announced it was buying EMC earlier this month for $67 billion, it would have been easy to see the deal in isolation, but what if it were the first of many such deals? Could Oracle, for example, make a play for HP’s Enterprise business? One well-connected source tells us that even this may be possible.

Consider that HP sold TippingPoint to Trend Micro for $300 million and separately announced it was getting out of the public cloud market last week — perhaps shedding unprofitable pieces ahead of the split or making it more attractive to a potential buyer.

Rumors of Oracle buying HP go back as far as 2011. This, in spite of a lawsuit between the two that was eventually settled. There was further bad blood over Oracle’s hiring of former HP CEO Mark Hurd. In spite of all this, as HP gets ready to split into HP Enterprise and HP Inc, it’s not so outrageous to imagine a company like Oracle scooping up HP Enterprise and incorporating its pieces into its vast corporate machine.

It wouldn’t be the first time we’ve seen great technology companies combine in quick succession, even ones with a checkered history.

Whether Cisco, IBM, HP, SAP or even Oracle; at least some of these companies could be swallowed up or combined just as EMC was. Perhaps EMC CEO Joe Tucci, seeing the handwriting on the wall, got out first, earning his shareholders a tidy little return in the process. It’s hard to expect that the next rounds will be quite as lucrative.

To The Cloud

As we enter a time of massive disruption, large tech companies that have made their names selling hardware and software to the data center, could be in trouble as customers shift from running massive data centers to the cloud.

If you want proof of the changing marketscape, GE announced last year that it was closing 90 percent of its data centers within the next several years, moving all of its infrastructure and much of its software to the cloud. While it is certainly not alone in this strategy, when a company the likes of GE makes this type of announcement, it has to be seen as a huge signal that the market is changing in a big way.

The big technology companies see what’s happening, of course. They aren’t stupid, but understanding the new market and actually moving to become a profitable business are not necessarily the same thing. Just last week Amazon reported a profit, driven by its highly lucrative and growing cloud business, Amazon Web Services.

At the same time IBM, a company that is trying desperately to transform into a cloud company announced its 14th straight quarter of reduced revenues. This record almost coincides with IBM’s first attempts to move to the cloud. Since, it has bought SoftLayer, launched Bluemix and bought a portfolio of SaaS products. It has made high profile deals with Apple, Twitter and others, and it is still struggling to find its way and to compete with the growing juggernaut that is AWS.

The Rise And Fall Of Mini Computers

You would be forgiven if you didn’t know that in the 1980s, Route 128 in Massachusetts rivaled Silicon Valley as the mini computer capital of the world. Companies with names like Digital Equipment Corporation, Data General, Wang, Apollo and Prime ruled the data center. Today, like technology dinosaurs, not one of those mini computer makers still exists — every last one, left behind in the flotsam of history.

As the article, The Rise and Fall Minicomputers put it:

While the demise of classic minicomputers was clear by 1985, companies continued offering them until the early 1990s, when the firms went bankrupt or were acquired by more astute competitors. (See Table 1) Wang declared bankruptcy in 1992. Compaq bought DEC in 1998, and HP acquired Compaq in 2002. EMC turned Data General into a data storage business in 1999.

Just as the mainframe gave way to the mini, and the mini begot the PC network, we now have the cloud and it has accelerated the pace of change to the point we could be about to witnesses a similar contraction of big, powerful companies that once ruled the world.

Against this backdrop, it seems possible, even likely that some of the largest companies will combine, get sucked up by private equity firms looking to make money on the lucrative licensing business — or even go bankrupt as Wang did.

We are living in an age of massive change, and the EMC deal could just be the start of the next massive technology contraction.

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