Why Tech ETF Owners Should Watch Dell Closely

Investors woke up to headlines on Monday of the largest takeover in the tech industries storied history. Private computer giant Dell shelled out $67 billion to acquire data storage company EMC Corp, in a move that drew attention more for its size than its motivation. Exchange traded fund investors would be wise to watch the fallout closely as Dell has positioned itself to challenge major tech players who are the foundation of some popular ETFs.

The acquisition comes at an interesting time in the tech landscape as the fully-integrated enterprise network solutions business has been shifting in recent years. Cisco (NasdaqGS: CSCO), IBM (NYSE:IBM), and Hewlett-Packard (NYSE: HPQ) have dominated cloud computing, mobility, and cyber security but EMC’s storage and virtualization assets coupled with Dell’s server business provides a broader range of products to mount a challenge to the public giants. Morningstar explains, “We believe that big industry names such as Cisco, IBM, and HP will be affected by the newly created enterprise’s ability to sell fully integrated solutions–including storage, networking, and servers–and to position these offerings as OpenStack/cloud convergence-ready products.”

The ETFs that are impacted by these companies are numerous and weighted heavily. The Technology Select Sector SPDR (NYSEArca: XLK) holdings total more than 8% between the three public giants with the private disruptor Dell unable to be added in any efforts to hedge market share shifts. Impact isn’t just contained to those three for XLK as EMC currently constitutes 1.36% – a $150 million+ allocation.

EMC also makes up larger positions in other tech-related ETFs, including 4.0% of First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY).

SKYY is a pure play on cloud computing companies, or tech firms that are direct service providers for “the cloud,” which include network hardware/software, storage and cloud computing services. The cloud computing ETF also has small positions in IBM 2.3%, HPQ 2.0% and 3.7% CSCO