EMC Misses Expectations but Says Dell Deal Remains on Track -- Update
April 20 2016 - 9:22AM
Dow Jones News
By Lisa Beilfuss
EMC Corp., in the process of being taken private by Dell Inc.,
logged disappointing results in its latest quarter amid an excess
of unfilled orders.
The Hopkinton, Mass., company struck a deal with Dell in
October, at the time valued at about $67 billion and representing
the biggest tech deal ever. Chief Executive Joe Tucci has
reiterated that the merger remains on track to be completed by
October, despite concerns that the deal was at risk partly because
of a drop in its value.
"We expect the transaction to happen on the original terms and
within the originally announced time frame," Mr. Tucci said
Wednesday. "Integration planning has accelerated...the leadership
team has been established, and we've received the vast majority of
antitrust approvals required," he reassured investors.
The deal includes EMC's controlling stake in VMware Inc., a
seller of data-center software that accounts for about a third of
EMC's top line. A series of missteps since the deal was announced
have hammered the share price of VMware, widely regarded as the
federation's crown jewel, and subsequently lowered the payout that
EMC shareholders can expect if the deal goes through. In October,
Dell's offer was valued at more than $33 a share. At the close of
trading Tuesday, the deal was worth under $30 a share.
Late Tuesday, shares in VMware Inc. surged after the company
said it would launch a $1.2 billion stock buyback program, a move
that is an attempt to support the merger's closure and that has, at
least for now, lifted that leg of the deal.
In premarket trading Wednesday, VMWare's stock traded 9.8%
higher. Shares in EMC added 2.5%. Since the deal's announcement
through Tuesday's close, the stocks are down 29% and 12%,
respectively.
For the first quarter, EMC reported a profit of $268 million, or
14 cents a share, up from $252 million, or 13 cents, a year
earlier. Excluding stock-based compensation expenses and
restructuring charges, among other items, earnings per share were
31 cents, flat from the year-ago period.
Revenue slipped 2.5% to $5.48 billion. Analysts projected 33
cents in adjusted per-share profit on $5.63 billion in sales,
according to Thomson Reuters.
EMC attributed the disappointing results to an excess of
unfulfilled orders at the end of the quarter. According to Chief
Financial Officer Denis Cashman, unshipped storage product orders
totaled roughly $75 million due to the timing of bookings within
the quarter.
In the VMware business, sales rose a slightly
better-than-expected 5% from a year earlier and the company backed
sales guidance for the year. In EMC's Pivotal segment, which offers
cloud and big data subscription software, revenue soared 56% from
last year's quarter. Those gains were offset by a decline in the
company's information infrastructure business, its biggest, where
sales declined 5.9%.
EMC worked to pare costs amid lower revenue in its information
infrastructure segment, taking expenses in the business down 8%
from a year earlier. EMC brought overall overhead expenses down by
2.5%.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
April 20, 2016 09:07 ET (13:07 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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