Computing rivals Dell, EMC in deal talks

Dell and EMC in merger talks    10:13 AM ET Thu, 8 Oct 2015 | 03:55

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• 03:55

  Dell and EMC in merger talks   

  10:13 AM ET Thu, 8 Oct 2015
• 02:35

  Dell-EMC in merger talks: Report   

  7:18 AM ET Thu, 8 Oct 2015
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  Dell in talks to buy EMC: David Faber   

  9:33 AM ET Thu, 8 Oct 2015
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  Dell makes bid for cloud computing company   

  7:44 AM ET Thu, 8 Oct 2015

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Dell, the world's third-largest maker of personal computers, is in talks to buy cloud computing company EMC.

Reuters first reported that Dell was in talks with banks about raising debt financing for an all-cash offer for EMC. The terms of the negotiations were not immediately known, Reuters said, adding that EMC had a market capitalization of about $50 billion as of Wednesday's close.

CNBC has confirmed the talks.

If the deal went through, it would be one of the biggest tech tie-ups ever, topping U.S. chipmaker Avago Technologies' $37 billion offer for rival Broadcom. That deal is still in process.

The Wall Street Journal, which first reported the deal talks, said EMC had started a strategic review of its business last year. Reuters reported that EMC had been under pressure from activist investor Elliott Management, which had lobbied for EMC's VMWare software business to be spun off.

In September, the WSJ reported that EMC was in talks with Dell and rival Hewlett Packard.

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Daniel Ives, senior technology analyst at FBR Capital Markets, told CNBC's "Squawk Box" on Thursday a tie up with HP would make sense and would yield a slight premium for shareholders. On net, an acquisition by Dell — which would result in a complex structure and produce high integration costs — would be "disastrous" for EMC shareholders, he said.

If such a deal were to go through, Dell would likely become a publicly traded company that effectively controls EMC. Dell became a private company in October 2013.

The best possible option for EMC would be to spin off VMWare, Ives said. If it does not make a decision by the time it reports earnings in about two weeks, a public proxy battle with Paul Singer's Elliott Management could break out, Ives warned.

"That house has been burning for a few years, and they're worried about if they have napkins in the kitchen," he said. "Now, finally, backs are against the wall, and there's an ultimatum that they need to do something."

EMC shares were higher in premarket trading Thursday.

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