Dell and EMC: to merge or not to merge?

Dell has rejected suggestions its partnership with EMC is a toe-in-the-water test for a merger or takeover, despite increasing speculation to the contrary.

Speaking to silicon.com, Dell's head of product marketing, Martin Boyce, said Dell is not interested in taking on a different business it doesn't fully understand.

"Michael Dell has said time and time again that he only wants to run one business that he understands," Boyce said. "There's no reason we'd want to look at merging with EMC."

However, these comments contradict the increasing weight of analyst opinion generated by yesterday's tie-up between the two companies.

+ss+Under the agreement, Dell will resell EMC's mid-range Clariion storage lines, with products to be jointly branded. EMC boss Joe Tucci highlighted the poor sales of Clariion as a major factor in his company's disastrous results, announced last week.

He hopes the agreement will give EMC access to the smaller and medium-sized business customers it has so far been unable to reach.

However, the deal goes further still. Both Dell and EMC salespeople will be advised to look for cross-selling opportunities, and will be incentivised to do so. EMC will also be given access to Dell's procurement systems if it feels it can save money by doing so.

This, against a background of increasing speculation over EMC's future as an independent company, has led analysts to question whether the deal is a pre-cursor to a takeover.

Tony Lock, senior analyst at Bloor Research, said firms were looking to consolidate because of the difficult market conditions. "This is a good deal for EMC in the short-term, but you have to ask what the long term holds. There is definitely the potential for these companies to merge here. At the moment anything can happen."

Both Dell and EMC rejected the assertion their deal had been forced by the downturn. However, increased pressure has been placed on the pair by the HP/Compaq merger, which itself could create a storage giant.

Sue Clarke, senior research analysts for Butler Group, said: "The first thing that struck me when I saw this deal is whether this is pre-empting a take-over."

The deal comes at a time when EMC has just unveiled its first quarterly loss in 12 years.