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Opinion: Dell/EMC deal is a ‘wake-up call’ for big tech

Oracle is among five potential acquirers listed by FBR analyst Daniel Ives in the wake of Dell’s $67 billion deal to take EMC private.

Many older technology companies, pressured by shareholders, are desperate to boost sales any way they can. With the world still awash with cash, acquisitions are the one surefire way.

And despite all the talk about rising interest rates in the U.S., which would make deals more difficult to finance, it still hasn’t happened. And when the Federal Reserve finally makes a move and raises the short-term federal funds rate, it will probably do so in small increments.

Dell Inc. agreed on Monday to pay $67 billion to transform itself into an IT-services provider by acquiring EMC Corp. EMC, -1.83% It has been only two years since Silver Lake and Michael Dell took the PC maker private in a $24.9 billion deal.

FactSet
With such woeful underperformance for the company’s stock, EMC’s board of directors was facing pressure from major shareholders to sell.

That’s a lot of money. The fact that such a huge private company can be built this way shows just how much money is available, and how likely it is that we’ll see wave of big tech mergers.

There have been 202 mergers or acquisitions worth $100 million or more so far this year involving tech companies, according to FactSet. That’s up from 182 at this time last year.

“Ultimately, we view this deal as a wake-up call to traditional IT stalwarts that they must finally use their massive treasure chests to be more aggressive on M&A; otherwise they risk losing their seat at this game of high-stakes poker,” FBR analyst Daniel Ives said on Tuesday.

S&P Capital IQ estimates that for the third quarter, the S&P 500 information technology sector will show a slight decline in earnings per share from a year earlier. That’s a rather disturbing number when considering that for the third quarter of 2014, the sector’s EPS rose by 8%.

On Monday, EMC said it expected a>


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