In rumored reverse-merger with VMware, Dell casts itself as industry’s contrarian

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As a former Dell executive, I’ve closely watched the rumors spilling out of the company about some kind of return to the public market. The latest story – that the infrastructure giant will allow itself to be bought by VMware, of which it owns about 80 percent – has sparked a predictable outcry. One of VMware’s largest shareholders called it a “terrible deal” and listed five other companies that would be better acquisition targets for the virtualization and cloud computing software provider than debt-ridden hardware maker Dell.

There’s a definite contrarian angle to what Dell seems poised to do. If you look across the data center and storage industry, all the big conglomerates have divested. Take the example of HP; they’ve tried to create value through greater focus by killing product lines or splitting into smaller, more specialized entities. But here we have a giant that wants to get even bigger. If Dell succeeds in closing this deal, it will call into question whether divestiture makes any sense. Moreover, if Dell thrives after such a deal, it will put on trial every strategic M&A move other infrastructure companies attempt to make to stay afloat in a space increasingly focused on moving to the cloud.

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