DELL

EMC earnings disappoint, but execs say Dell deal still on track

Posted April 20th, 2016

As Dell Inc. prepares to buy EMC Corp., the data storage giant reported disappointing financial results on Wednesday. EMC blamed these results on an excess of unfilled orders. 

Round Rock-based Dell Inc. announced last year it was buying Hopkinton, Mass-based EMC Corp. for $67 billion. Dell Inc. is transitioning from being a PC-maker to a wide-ranging full-service technology company. Dell Inc. is the largest private employer in the Central Texas region with about 13,000 local employees.

The EMC deal is crucial to building Dell's data storage business.  

The numbers

EMC reported first-quarter revenue that was down 2 percent year over year to $5.48 billion. Analysts, according to Thomson Reuters, had expected $5.63 billion in sales.

The data storage company reported first-quarter profit of $268 million, or 14 cents a share, which is up from $252 million, or 13 cents a share a year ago. 

After excluding for certain expenses, earnings per share were 31 cents a share. Analysts polled by Thomson Reuters were expecting 33 cents per share.

Much of Tuesday's earnings call focused on whether EMC's earnings reflected a temporary lull in the IT sector or reflected broader economic concerns. EMC executives argued that it was temporary.

"I absolutely believe the opportunity for IT spending will accelerate in the near future," said EMC CEO Joe Tucci.

Waiting on China

EMC CEO Joe Tucci assured analysts that EMC and Dell are on track to close the deal under the "original terms and originally announced timeframe."  That means some time between May and October of this year. 

He said progress toward merging the two companies had accelerated in the past 90 days.

Tucci said they have received all the necessary regulatory approvals except from countries like China. 

But Tucci said that he didn't think that the China approval was "delayed," and that "It is nothing I would say is concerning." He characterized regulatory approval as a three-step process that Dell was following. 

Shareholder concerns

The Wall Street Journal notes that there has been angst over the deal among EMC shareholders

EMC owns a controlling stake in VMware Inc., which sells data center virtualization technology. The price of VMware stock has been on the decline, which would mean a lower payout for EMC shareholders, the Journal notes. 

But VMware announced a $1.2 billion stock buyback program on Tuesday, sending its stock price back up again. 

After the Dell purchase goes through the combined company is expected to have $80 billion in revenue.

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