UPDATED 12:49 EDT / SEPTEMBER 12 2016

NEWS

Dell sells off EMC’s content management division for $1.62B

Days after announcing plans to lay off 3,000 workers from EMC to reduce operating expenses, Dell Technologies Inc. is making another big reduction at its newly acquired storage subsidiary. The vendor today entered an agreement to sell the Enterprise Content Division (EDC) to Canadian software giant OpenText Corp. for $1.62 billion.

While business units that find themselves on the auction block are often sold due to poor financial performance, EDC boasts a strong balance sheet with gross profits of 68 percent as of March 31. Dell is only offloading the group to OpenText because its area of focus doesn’t align with the management team’s growth priorities, which are concentrated mainly in the data center infrastructure market. Selling the division will enable Michael Dell and his team to spend more attention on the company’s core product lines while helping to pay off the multibillion-dollar debt that was incurred by the purchase of EMC.

The latter factor is arguably the more important of the two because the faster Dell can pay back its creditors, the less interest it will owe, which in turn frees up capital for business activities. And the vendor needs all the resources it can muster to fend off the growing competition in the data center market. Dell must contend not with old rivals such as Hewlett Packard Enterprise that are likewise in the process of streamlining their operations, but also emerging startups seeking to take advantage of new industry trends.

As for OpenText, the deal buys it three of the most popular product lines in the enterprise content management market: Documentum, InfoArchive and LEAP. The solutions enjoy broad enterprise adoption that is especially strong in the healthcare, life sciences, and government sectors. All the customer accounts that EDC has racked up under EMC’s wing will be moved over to the Canadian company along with its workforce. The companies expect the deal to close sometime in the next three months pending the usual closing conditions.

In conjunction, Dell and OpenText also plan to negotiation a partnership designed to “expand customer offerings and to better serve customers.” Since the former company has made it clear it’s looking to compete directly in the content management space, the alliance will presumably focus mainly providing product integrations and driving joint sales.

To learn more about how EMC and its remaining subsidiaries will move forward, watch theCUBE‘s recent interview with Michael Dell at VMworld. (TheCUBE, owned by the same company as SiliconANGLE, was the paid media partner for VMworld. Neither Dell nor other sponsors has editorial influence on coverage.)

Image via theCUBE

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