​Dell edges towards EMC merger, but where’s VMware?

As Dell moves closer to EMC, VMware backtracks on Virtustream Cloud business.

Michael Dell - Chairman and CEO, Dell

Michael Dell - Chairman and CEO, Dell

Dell moved a step closer to sealing the sale of the century this week, with no better offers on the table for the $US67 billion valued EMC.

Following the tech giant’s proposal in October, the “go shop” period - in which EMC asked for alternative bids to qualify the valuation - ended over the weekend with no other offers received, or at least no better offers.

But as the titans of the industry prepare to unite, VMware - which is around 80 per cent owned by EMC - has backed out of plans to take over EMC’s cloud service, Virtustream, thickening an already complex plot.

Announced in late October, shortly after the Dell / EMC proposal, the backtrack now sees VMware continue to separately operate its own Cloud service, known as vCloud Air.

Going forward, EMC will continue to operate Virtustream as part of the company’s collection of federated organisations, and remains “100 per cent committed” to the business, “which represents our fastest-growing Federation entity.”

But with plans to own Virtustream on a 50-50 basis between EMC and VMware now shelved, the industry is left wondering what next for VMware.

Shares in the company fell over 3 per cent in trading following the news, with FBR Capital Markets analyst Daniel Ives backing VMware’s decision to rip up the contract.

“Virtustream was just the latest in a string of frustrating moves that VMware investors have grown accustomed to over the years and is now hitting a boiling point as seen in the VMware selloff debacle over the last six weeks,” he told the Wall Street Journal.

With cloud chaos now upon the industry, the Dell / EMC transaction remains scheduled to close between the months of May and October 2016, subject to customary conditions, including receipt of required regulatory and EMC stockholder approval.

“EMC and its representatives solicited alternative acquisition proposals during the “go shop” period,” an EMC spokesperson stated.

“No acquisition proposals were received or deemed to constitute a Superior Proposal to the existing merger agreement.”

With the “go shop” period now expired, EMC will continue to work with Michael Dell, MSD Partners and Silver Lake to pursue the combination of Dell and EMC.

“Once completed, the new business promises to be an enterprise powerhouse, with highly complementary routes to market, that will help customers drive their digital transformations and journeys to the hybrid Cloud,” an EMC spokesperson stated.

“Under Dell’s privately-controlled structure, the combined company will have more freedom to innovate and invest for long-term leadership, allowing for the widest range of technology choices to customers, while building out an aligned global ecosystem of partners.”

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