Business Technology

Wednesday 21 March 2018

Is Michael Dell's $67bn punt on the future the next trillion dollar pay-out?

'This is the next trillion dollar opportunity,' said Dell.
'This is the next trillion dollar opportunity,' said Dell.
Adrian Weckler

Adrian Weckler

How often do you use your phone for online stuff? Facebook? Email? Looking things up on Google? The answer is probably more and more.

This is one reason why Dell is paying $67bn to buy EMC. Michael Dell is taking an almighty punt on the future being a zillion times more data-intensive than it is now. He's had a good look at the rollout of fibre broadband and 4G networks and reckons all this data needs somewhere to live.

On this point, he's right.

In Ireland, the average person's mobile data usage in Ireland is now over 2GB per month and doubling every year. We've stopped capping home wifi services for things like Netflix, YouTube and anything else that we and our kids now do, but usage here is soaring too. At the last count, UPC's (now Virgin Media) average customer monthly data level was coming in at about 30GB. It has probably risen significantly since then.

And at work, more and more of the stuff we do every day needs greater data flow management capacity. It's not just email and documents: the underlying basis of everything your computer now does simply needs more power and storage.

And every time Intel comes out with a new chip (which is every year) or Apple boosts its iPhone screen and camera (which is every year) or movie networks increase their speeds and geographical reach (which is every year), it results in all of us pinging bigger, more sophisticated files around the place.

So where does all this data go? Who's managing it? Who's paying for it?

Few of us think about this. We all imagine it's like air - it just happens. But any time there's a glitch or a problem - often caused by 'old' (maybe only three or four years old) systems being overwhelmed by our daily datagasms - it disrupts our lives in a pretty big way.

This is partly why Michael Dell is grabbing the chance to seize one of the world's top data storage companies. He reckons we're only waking up to the fact that our lives are becoming vast data-consuming engines. And someone needs to take charge of arranging it all.

"We're going to be processing 44 zettabytes by 2020," said Dell last week. (A zettabyte is a trillion gigabytes or a million petabytes. Currently, the world processes about eight zettabytes per year. According to researchers, 44 zettabytes is roughly the amount of space it would take for every word that every human has uttered over the last 5,000 years to be recorded and stored at 16Gz quality.)

"And look at the age of the internet of things we're entering," said Dell. "We have machine-to-machine communications, robotics, drones and enormous numbers of sensors starting to come on stream. About 85pc of devices aren't yet connected - but they will be. And the internet of things is 1,000 more devices multiplied by 1,000 more applications multiplied by 1,000 more data. We have to be able to make sense of all of this machine-generated information."

This is where Dell comes in, he says.

"This is the next trillion dollar opportunity," said Dell.

Not everyone is convinced. Financial analysts talk about mega-merger woes (this would be the biggest tech takeover in history) and $2.5bn yearly debt repayments shackling the company's ability to develop products. They also reckon rivals such as Amazon are where much of the future action is, anyway.

And some rivals, such as HP boss Meg Whitman, have sought to slag Dell off to try and boost their own internal corporate morale.

"To pay back the interest on the $50bn of debt that the new combined company will have on their balance sheet, Dell will need to pay roughly $2.5bn a year in interest alone," Whitman wrote in an email to HP staff, which may as well have been a public blog post. "That's $2.5bn they will allocate away from R&D and other critical activities, which will keep them from better serving customers."

Whitman, who may be thinking about her own company's problems in running separate divisions successfully, went on to predict "chaos" at Dell.

Michael Dell brushed this off as corporate jostling. "I think she got some of the facts wrong," he said. "We'll let the facts speak for themselves."

Other more optimistic analysts say that Dell has proven himself as someone who can handle debt - and is, first and foremost, a top businessman that can beat rivals in areas he focuses on. They point to a transformation in the company since it was taken private two years ago.

But the main point to Dell's acquisition of EMC is your monthly data usage. The more you rely on your phone, home wifi and work PC to handle video and more sophisticated web stuff, the more important data storage becomes.

And that's what Dell's $67bn is going towards.

Sunday Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business