Dell EMC

Why is HP Enterprise happy with the Dell-EMC deal

The $67B Dell-EMC deal went through at a price far higher than the market capitalization of HP, which stands at nearly $53B. Still, HP is in a celebratory mood after hearing about the deal.

In a memo to her employees (published on various media sites), Meg Whitman, CEO, cited several reasons why the development is good news for Hewlett Packard Enterprise, the new entity which is only 20 days away from its birth.

HP is doing the exact opposite of Dell to gain a larger share of the enterprise IT market— to shrink the company into a smaller one.

Meg’s email exhorted employees with a carpe diem call. She said, “This is validation for the strategy that we have laid out and I am not surprised that others would try to emulate it. But, the reality is that we are two years ahead of the game and it will be difficult for others to catch up.”

Contextualizing the deal, Meg said that to pay off the interest of $2.5B per year on the $50B debt on their balance sheet, Dell will have to divert resources away from R&D and other business critical activities. Next, integrating the two companies will be will be a massive undertaking and an enormous distraction for employees and their management team.

Continuing to pick on the negative thread, Meg pointed out in the memo that merging the product portfolios would disrupt their business and create confusion for the customers. Likewise, there would be chaos in the channel as they bring together two different programs and approaches.

Ending the memo, she exhorted, “So, get out in front of your customers and your partners. Tell them our story. Take advantage of this moment.”

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