M&As are a mainstay of the technology industry for as long as anyone can remember. For incumbents, it is way for them to enhance their portfolio or enter new markets. It is a way to get around the issue of expensive and expansive R&D, allowing them to quickly go to market with new offerings that otherwise would not have been possible to do organically with in-house staffing. For example, IBM Research began in 1945 with the opening of the Watson Scientific Computing Laboratory at Columbia University. Today, IBM Research includes 5 Nobel Laureates, 9 US National Medals of Technology, 5 US National Medals of Science, 6 Turing Awards, and 13 Inductees in the National Inventors Hall of Fame.
Anyway, recently there have been behind the scene talks between HP and EMC for what some would argue to be a mega merger. EMC as most everyone in the tech industry know is the world’s largest storage vendor. With more than 63,000 staff worldwide and revenue in excess of US$23 billion, it is one of the most successful computing vendors in the market. Part of its success is attributable to acquisitions that have allowed it to corner market sizeable market share. VMware leads the world in x86 virtualization while RSA Security is a mainstay data security solution for some of the world’s largest businesses. To date, EMC has acquired more than 71 companies since 1996 – an average of 4 acquisitions per year.
Much older and no less venerable is Hewlett-Packard (HP). Founded in 1939, it too has grown on the back of 129 acquisitions since 1986. But being a more diversified business, compared to EMC, HP’s success in acquisitions were also followed with significant write-offs like US$8.8bn between 2012 and 2013 following the acquisition of Autonomy for US$11 bn in 2011. HP jumped back on the acquisition trail in 2014 with the Shunra buy.
So where are we at today? The most recent talks in Silicon Valley is the potential merger of EMC and HP which would yield a combined annual sale of US$130 billion by WSJ estimate.
So what would an EMC-HP merger mean to the industry? For one thing, it would allow the combined company to truly dwarf everyone else within the data storage marketplace. It would give a leg up for HP’s server business which has been languishing in recent years. EMC has been under attack from more nimble flash storage startups that are cropping all over the place. It would also help both companies stave off competition from partners like Cisco that have recently started to come up with their own competitive solutions.
We’d like to get comments from our readers on what they think a combined HP-EMC would mean to their market.