Dell Inc. said it agreed to buy EMC Corp., Massachusetts’ biggest technology company, in a cash and stock deal valued at about $67 billion, removing independent ownership from one of the last surviving companies that made New England a tech hotbed in the 1980s.
The acquisition, the largest ever in the technology industry, would make EMC part of privately owned Dell, relieving pressure from Wall Street to break apart the Hopkinton-based data storage company’s collection of separately managed IT businesses.
Management of the two companies said the deal would make the new Dell both larger and more nimble, giving it the ability to sell products to new customers while avoiding the drive for short-term profits by public investors.
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The takeover of EMC by Round Rock, Texas-based Dell — including significant debt that Dell is taking on to pay for the deal — raises questions about the future of EMC’s workforce in Massachusetts, where it employs nearly 10,000 people. The chief executives of the two companies, Dell’s Michael Dell and EMC’s Joseph M. Tucci, wouldn’t say how many jobs could be eliminated as the two companies combine their already sizable operations.
Dell will take over as chairman and CEO of the combined company, with Tucci stepping down.
The CEO’s sought to downplay fears of mass layoffs, saying their projections showed that increased sales were about three times the size of any cost savings coming from eliminating overlapping jobs. Separately, Tucci said EMC would continue with previous plans to cut about $850 million in costs through 2016.
Dell and Tucci said said the headquarters of EMC’s core business, selling data-storage devices to large companies, will remain in Hopkinton after the merger and grow with the addition of Dell’s server business. EMC executives running the company’s division will remain in place, the CEOs said.
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“We’re not actually going to move a whole lot of people around,” Dell said. “This business is just going to get a whole lot larger as we close the transaction. This’ll mean great things for this area.”
It’s unclear whether EMC will continue to operate under that name once the deal closes, likely in mid-2016. A Dell spokesman said the company would not speculate on future changes.
EMC’s stock rose modestly after the deal was announced, trading shortly afeter 1 p.m. at $28.22 per share, up 36 cents or about 1.3 percent.
Werner Zurcher, an analyst who follows EMC for Gartner Inc., a research firm in Stamford, Conn, said the deal had clear benefits for Dell, which can now add billions in revenue and larger corporate customers to its base.
“I’d say the benefits to EMC and their customers aren’t quite as clear,” Zurcher said. “I have never know companies to double in size and get more nimble.”
EMC has searched for more than a year for a way to address mounting competition in its storage business while facing pressure to break up the company from an activist investor and trying to plan for the retirement of Tucci, its longtime leader.
Tucci acknowledged that the company’s stock had been sluggish, and said the combination with Dell would allow EMC to plan for longer-term goals rather than trying to meet quarterly shareholder demands for bigger sales and strong profit.
The deal also keeps together the EMC “federation,” a group of companies that operate in separate but increasingly overlapping IT markets. EMC’s main data-storage business is the largest segment of that federation, with more than $18 billion revenues in 2014 and solid profits.
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Its next-largest asset is VMware Inc., a publicly traded company that is 80 percent owned by EMC. VMware, which makes software that allows data center customers to more efficiently use their banks of servers, had about $6 billion in revenue in 2014. But it is growing faster than other parts of EMC, and is more profitable.
“There’s a lot of ways to keep the strategy that we have going, enhance it, and create great value,” Tucci said. “After having the stock flat for quite a number of years, I think this gives shareholders quite an attractive offer.”
Shares of VMware, headquartered Palo Alto, Calif. dove nearly nearly 11 percent, or $8.60, after the deal was announced, trading $70.05 shortly after 1 p.m.
EMC rose to prominence selling data-storage devices — refrigerator-sized cabinets filled with disk drives, networking switches, and the software that makes it all run together. Those devices hold and supply digital data to servers, the large banks of computers that retrieve and route information to users.
Together, those devices power the large data centers that hold an ever-growing array of information about people’s personal and working lives, from e-mail systems and health care records to pictures of the latest family vacation.
But the increasing use of cloud computing systems — Internet-connected data centers run by companies like Microsoft Corp. and Amazon.com Inc. that firms can rent -- means fewer companies need to buy and manage their own data storage.
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The agreement with Dell calls for EMC shareholders to receive $24.05 per share in cash, plus tracking stock linked VMware The companies estimated that EMC shareholders would get a total of $33.15 including the tracking shares, whose value will fluctuate along with VMware’s stock price.
That prices represents a 28 percent premium over EMC’s closing price before The Wall Street Journal reported last week that the companies were in talks to merge.
EMC previously held merger talks with Dell and Hewlett-Packard Co., which later decided to split itself into multiple companies. The combined company would be a potent rival to HP and International Business Machines Corp. in the market for big-business computers and software.
For its part, H-P said the combination of Dell and EMC would complicate both companies’ attempts to compete in the marketplace.
“Two of our largest competitors are attempting a highly distracting, multi-year merger, just as we are launching two new, focused companies, H-P spokesman Howard Clabo wrote in an e-mailed statement.
The deal will be financed through a combination of new common equity from Michael Dell and his investment firm MSD Partners, private-equity firm Silver Lake, and Singapore investment fund Temasek; the issuance of tracking stock; and new debt financing and cash on hand. There are no financing conditions to the closing of the transaction.
Michael Dell and related stockholders will own approximately 70 percent of the company’s common equity, excluding the tracking stock, similar to their pre-transaction ownership.
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The deal, which is reminiscent of the sale of Digital Equipment Corp. to Compaq Computer in 1998, marks an important milestone in the state’s history as a tech hotbed.
EMC, founded in 1979 by Richard Egan and Roger Marino, who met as college roommates at Northeastern University, is a direct descendant of the tech companies along Route 128 that revived the Massachusetts economy in the 1980s, only to be swamped by the advent of the personal computer. Those companies -- Digital, Wang Laboratories, Data General --built large computer systems for corporations, and were unable to adapt when the industry moved to smaller, cheaper personal computers
Like its predecessors along “America’s Technology Highway, EMC contended with seismic shifts in computing. EMC’s longevity has been remarkable in the technology industry, where billion-dollar companies can rise and fall seemingly overnight. It generates more than $24 billion a year in revenue, and remains solidly profitable.
But some investors called for EMC to move faster. The hedge fund firm Elliott Management Corp., which owns about 2 percent of EMC shares, has been publicly pressuring EMC to break itself apart since last year.
In a statement Monday, Jesse Cohn, Senior Portfolio Manager at Elliott, said Elliott “strongly supports” the deal.
Dell, too, has faced problems. The company that became famous for selling inexpensive, built-to-order PCs by mail in the 1990s was taken private in 2013 in a leveraged buyout by Michael Dell and private equity firm Silver Lake. With PCs becoming cheap, generic commodities with low profit margins, Dell has tried to reinvent itself as a provider of high-end hardware and services to large enterprises. The deal would allow Dell to sell more services to its existing customers.
EMC’s rise transformed its hometown of Hopkinton and the surrounding area, providing jobs for generations of Massachusetts residents and long-lasting wealth for those lucky enough to hold its stock during periods of rapid growth in the 1990s.
But for all its dominance and longevity in the tech industry, EMC has remained a relative unknown even in its home state.
“When we were looking for a new advertising agency in 1999, the agencies bidding for the account made an intro tape, showing us what they can do and why we needed their services,” said Gil Press, a former EMC marketing executive. “Boston-based Arnold Worldwide went around Boston asking people if they knew who EMC was. No one did.”
EMC has tried to raise its public profile over the years, acquiring naming rights for the luxury EMC Club section of Fenway Park in 2005.
Founders Egan and Marino were major benefactors of their alma mater, Northeastern University, with both names carved into buildings on the campus. Egan went on to become ambassador to Ireland under President George W. Bush, while Marino owned the Pittsburgh Penguins of the National Hockey League for several years.