EMC Hears Dell's Footsteps
SAN FRANCISCO -- Shares of EMC (EMC) tumbled on news that one of its largest customers may soon become one of its largest competitors.
Computer giant Dell (DELL) announced plans Monday to acquire data storage gear maker EqualLogic, signaling its intention to develop homegrown data storage products rather than reselling EMC's as it does now.
What's more, the $1.4 billion price it paid for EqualLogic underscores Dell's aggressive approach to sell storage gear to small and mid-sized business, which have been a fast-growing segment of EMC's business.
EMC shares were recently down $1.07, or 4.4%, to $23.48 amid a selloff in the broad market. Earlier Monday, Goldman Sachs analyst Laura Conigliaro downgraded the stock, citing primarily valuation concerns, as well as possible competition from the Dell announcement.EMC shares have doubled in the past seven-and-a-half months. Over the last year, Dell has become one of the biggest buyers of EMC equipment. At the end of the June quarter, Dell accounted for about 15% of EMC's total revenue, up roughly 11% a year earlier. Both EMC and Dell said that their relationship remains intact and that the EqualLogic storage gear won't replace purchases Dell makes from EMC. In 2006, the two companies extended their relationship through 2011. But the deal will put the two squarely in competition for customers on the lower end of the market.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV