Big news out of Round Rock, Texas and Hopkinton, Massachusetts yesterday: Dell and EMC have signed a definitive agreement under which Dell, together with Michael Dell, MSD Partners and Silver Lake, will acquire EMC. We want to share our insights on this news, and explain what it means for the storage market.
Pure Storage both cooperates and competes with both companies. Many of our customers also run Dell servers and VMware software, but we of course compete with both EMC and Dell storage. Our thoughts:
- This transaction signals the end of an era. EMC has been a leader and an iconic brand in the storage industry, leading the market for Tier 1 or performance optimized storage for a couple of decades. Just a few years ago, the idea that EMC would be an acquisition target would have been unthinkable, and yet here we are.
- Clarity is still a ways off. The transaction is rumored to have a 60-day “go shop” clause during which time EMC may seek other bidders. Then we would expect at least 6-9 months to close the transaction. If anything happens along the way that derails this transaction (e.g., higher interest rates on the substantial debt required, a lower VMware stock price), EMC would be left in a weakened state.
- EMC and, to a lesser extent, Dell customers and partners can expect some upheaval in the coming months and years. In our view, success in combining the Dell and EMC organizations as a private company depends on draconian changes to management, product portfolios, partner relationships and personnel. The level of debt contemplated in this deal is unprecedented (we have heard estimates of $45B on top of what Dell already owes for taking itself private a couple of years ago).
In addition to likely inevitable layoffs, we would expect to see redundant and less successful product lines eliminated, with future investment in flagships like Symmetrix/VMAX, VNX and Compellent potentially at risk. Will the new Dell+EMC choose to invest in two All-Flash Arrays in an attempt to fund both XtremIO (more mature) and DSSD (more innovative) or try to pick a winner now? Partners will also likely face disruption as disparate channel programs are integrated and an emphasis on efficiency/debt reduction infringes on partner margins. However, perhaps the greatest risk to customers and partners is that some of the best and brightest employees choose not to take on a painful multi-year integration effort.
This transition from performance disk to all-flash is already well underway. According to the IDC Worldwide Quarterly Disk Storage Systems Tracker published in September 2015, incumbent storage vendors EMC, Dell, IBM, NetApp and Hitachi, all suffered year-over-year revenue declines in the second quarter. In a recent report from 451Research, IT professionals voted all-flash arrays as the “hottest” technology for the second year in a row, and Pure Storage as the “most exciting” vendor, unseating EMC from a position that it held for a decade.
For EMC and Dell: We wish you well. While we compete vigorously with EMC, we respect them and the industry leadership position they have held for decades. Marketplace competition, after all, drives innovation, customer value, and industry transitions like the flash and cloud disruptions now underway. I believe competing with EMC has made Pure a better company, and we look forward to continued collaboration around complementary products like Dell servers and VMware even as we continue to compete with the Dell/EMC storage business to see who can best serve the needs of customers and partners.
For EMC and Dell customers and partners: This is a great time to investigate alternative solutions. Businesses need to get the most value out of their technology investments. One simple metric of success is customer satisfaction as measured by industry standard metrics like NetPromoter Score (NPS). Pure Storage’s NPS is 79. That is more than 2½ times (or 50 points) higher than a third party’s accounting of both EMC’s and Dell’s score for 2015. As EMC and Dell storage customers and partners contemplate your next moves, we invite you to try the Pure Storage experience. We are so confident that you will be thrilled that we offer a Love Your Storage Guarantee. Come talk to us here!