Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC approves Dell acquisition of data storage provider EMC, (Mar 1, 2016)

By Edward L. Puzzo, J.D.

The European Commission (EC) has approved under the European Union (EU) Merger Regulation the acquisition of data storage and software provider EMC by computer technology company Dell, the EC has announced. This follows the February 22 expiration of the Hart-Scott-Rodino waiting period, representing clearance of the merger by the FTC.

U.S.-based Dell—held privately by Denali Holding—develops, sells, and supports computers and related products and services, including servers, networking products, storage systems, software, IT, and business services. U.S.-based EMC Corporation offers data storage, information security, virtualization, analytics, cloud computing, and other products and services that enable businesses to store, manage, protect, and analyze data. EMC is a majority owner of VMware, Inc., a supplier of virtualization software that can be used in conjunction with servers based on x86 architecture of the type sold by Dell. Both companies provide data storage systems and, in particular, external enterprise storage systems.

External enterprise storage systems. The Commission assessed the effects of the transaction on the market for external enterprise storage systems. It found that the merged entity has a moderate market share in the market for external enterprise storage systems and that the increment brought about by the merger is small. The Commission found that the merged entity would continue to face strong competition from established players, such as Hitachi, HP, IBM, and NetApp, as well as from new entrants.

Virtualization software. The Commission also investigated the risk that the merged entity could attempt to restrict or degrade access to VMware's software for competing hardware vendors. VMware has a strong market position in server virtualization software. Nevertheless, the Commission found, on the basis of available evidence, that the merged entity would have neither the ability nor the incentive to shut out competitors, given that: (a) VMware's products are facing increasing competition from other providers of server virtualization software such as Citrix, Microsoft and Red Hat and, and to a lesser extent from new technologies; (b) customers typically multi-source from more than one server virtualization software provider; (c) VMware's business strategy has been hardware and software-neutral and it has been working with a large number of vendors; and (d) in the server market, Dell has strong competitors that will continue to operate either in partnership with VMware or with third party virtualization software providers.

Margrethe Vestager, Commissioner in charge of competition policy, stated: "Given the strategic importance of the data storage sector, I am pleased that we have been able to approve Dell's multi-billion dollar takeover of EMC within a short space of time while making sure that there would be no adverse effects on customers. I appreciate the close cooperation we have enjoyed with our US counterparts at the Federal Trade Commission."

Companies: Dell, Inc.; Denali Holding Inc.; EMC Corporation; VMware, Inc.

News: AcquisitionsMergers Antitrust