Iomega has dumped its Chinese fiancé and is running away with the richest man in the room. Yes, it’s EMC, which last month interrupted Iomega’s plans to marry a subsidiary of Great Wall Technology, with an unasked for and spurned offer of $178m.
EMC returned a few days later with more dough, about $213m cash, or $3.85 a share. All in all, not a bad price for a company that pulled in net income of just $10.1m in 2007. The upside for EMC is Iomega’s net revenues of $336.6m and more than $60m cash in hand.
So, Iomega knows how to sell but appears to have forgotten how to make money when selling. This is not a problem that EMC is familiar with. We suspect a lot of cost-saving “synergies” will be found.
Anyhow, offer no.2 was enough to get Iomega’s board talking. And today they said yes to the deal, which will see the company metamorphose into the bedrock of EMC’s new consumer/small business product division.
So what does EMC get for its money? A live consumer brand, yes, retail and small biz channels to market, yes, revenues, yes. Technology? We doubt that EMC’s particularly interested in Iomega’s technology – here is a company after all that is still best known for the Zip external drive (when did you last see one of those.) But Iomega is known at least for something. And it is interested enough in EMC technology to have bundled its partner’s backup software with all external hard drives since 2004.
Iomega shareholders should get their cash tender offers in two weeks or so. EMC says the deal will have no material impact for the full fiscal year, which just goes to show how bloody big it is. Iomega is paying off ExcelStor Great Wall Technology Limited with a $7.5m termination fee. The two had agreed to merge last December.
The acquisition is expected to close in June. In the meantime you can peek at the EMC victory statement.