Further thoughts on Dell’s acquisition of EMC

My prior public post about the EMC / Dell acquisition covered impacts to EMC shareholders and employee shareholders. This one is, again, my personal thoughts to discuss some of the broader implications. All of these observations are made from public sources and knowledge of how the tech industry works. I expect anyone familiar with the tech industry to be able to make similar observations / predictions.

Employees

For EMC (and in some respects, Dell) employees, the acquisition is going to be a mixed bag. Employees have no more details of the acquisition than the public at this point, so there’s a lot of uncertainty. So far, the message has been: it’s business as usual until the deal closes — which is at least 7 months away. I expect EMC will see higher-than-usual attrition over the next few months as folks who weren’t really looking before now leave for other opportunities. I wouldn’t be surprised if EMC starts offering some form of carrot to key players incentivizing them to stay. A lot of business obligations can come due in the next 7 months.

By many accounts Dell invested more money in R&D groups after going private. That’s good news for anyone in an engineering group. A friend also pointed out he “[thinks] it will be beneficial for engineering organizations [to be inside by a non-public company]. The less chained by the public market for short term profits and gains, the better the chances of being able to survive flat growth a quarter or two to realign priorities” — which I completely agree with.

Dell and EMC don’t have a whole lot of overlap in products, although there are a few, so there’s unlikely to be layoffs trying to reduce duplication there. There will probably be layoffs as Dell and EMC try to reduce non-engineering duplication in areas like HR, marketing, IT, sales support, and sales to some degree. Dell is going to need to reduce their ~$49 billion debt load after the acquisition (which they intend to do in 18-24 months) and it seems to me that reducing head-count is one way to achieve that. Another way of reducing their debt load would be to divest themselves of some products or product lines, either by selling them to someone else or simply stopping spending money on them by sunsetting the products and laying off the people.

Post-acquisition I would have expected Dell to put a kibosh on the use of Macs which are growing in EMC, but a friend who works for Dell said that other acquisitions which had Macs keep them alongside a Dell laptop for use in front of customers. Given how closely Dell seems tied to Microsoft, I expect its IT organization to push (require?) Windows workstations instead of Linux workstations which are the system of choice in Isilon.

That same friend at Dell says compensation is great and everything is cash or cash awards, so no stock — not a surprise since it’s a privately-owned company. They said it does appear that being private has allowed Dell to do more than play the quarterly-numbers game.

From some of the intangibles, there’s a whole lot of potential upsides and downsides. EMC is a very east-coast company who doesn’t really grok how west-coast companies work. I expect (but don’t know) that Dell being based out of Austin is more aligned with the west-coast mentality which is nice. Both EMC and Dell have a perfect 100 rating on the HRC Corporate Equality Index. Both have both LGBT and Women’s employee resource groups, among others. Dell trumps EMC in offering matching charitable donations but not on-site dry cleaning in MA like EMC — so east coast.

Recruiting

EMC probably isn’t going to be really pushing recruiting during the transition, except for backfills. I expect recruiting for EMC to be challenging until the deal closes. Typically public tech companies include some equity in their offer, either as stock options or RSUs, that vest over a few years. Equity is usually enticing because their worth is tied to the market performance of the company. If the stock goes up, the equity is worth more. This gives the illusion that hard work by an individual can improve the value of the stock.

Dell has assured that the EMC share price is largely fixed around $27 until the deal closes mid-2016. This also fixes the price of any options (which are rendered pretty much worthless if they are issued after today) and RSUs. This makes RSUs more like promises of fixed values than a promise of potential future growth rendering their use in offers less enticing than they were before the acquisition announcement.

It’s going to be hard over the next 12 months to even get people to interview with EMC. Who wants to start working at a company in the middle of a huge acquisition where there will be reorganization and “vision alignment” as soon as the deal closes?

I think overall the acquisition is going to be a positive thing, but the sooner it completes the better it is going to be for everyone.

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cpeel

I'm a gay geek techie space nerd living in Seattle, WA.

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