Dell Technologies Inc.NYSE
Over 20% Upside For EMC
Chris DeMuth Jr. • 46 Comments
Chris DeMuth Jr. • 46 Comments
Mon, Sep. 12, 9:59 AM
- OpenText's (OTEX +7.6%) offer for the ECD (NYSE:DVMT) business represents 2.7x ECD FY 2015 revenue ($599M).
- Looks to onboard the acquisition to OpenText's operating model within the next 12 months.
- Transaction expected to close within 90 to 120 days, subject to regulatory approval and formal closing procedures.
- Mark J. Barrenechea, OpenText CEO and CTO: "We are at the beginning of the Digital revolution where extreme connectivity, automation, and computing are converging. This acquisition further strengthens OpenText as a leader in Enterprise Information Management, enabling customers to capture their Digital future and transform into information-based businesses. We are very excited about the opportunities which ECD and Documentum bring, and I look forward to welcoming our new customers, employees, and partners to OpenText."
- Conference call
- Press release
Wed, Sep. 7, 3:04 AM
- The final piece in Dell's complex $62B acquisition of EMC is set to fall into place today, when an unusual tracking stock with a notional face value of more than $16B starts trading in New York to help finance its takeover.
- The new Class V shares will represent some 65% of its stake in VMware (NYSE:VMW) - though holders will have no direct rights in the company and Dell will have the right to switch the underlying assets the shares represent in future.
- Will the largest acquisition ever in tech represent the creation of a new giant or the management of a declining sector of the industry?
Fri, Aug. 19, 7:43 AM
Tue, Aug. 16, 8:04 AM
Tue, Jul. 19, 3:24 PM
- EMC (EMC +2.1%) announces the near-unanimous approval of its shareholders to merge with privately-held Dell.
- $60B deal would mark the largest ever in the technology space.
- The newly formed company will be known as Dell Technologies and will absorb EMC's VMware (VMW +9.3%), RSA Security and Virtustream.
- From Joe Tucci, EMC Chairman and CEO: "Today's resoundingly favorable shareholder vote clearly supports our view that combining Dell and EMC will create a powerhouse in the technology industry. The Board and I care very deeply about, and have worked diligently to represent, what we believe is the best outcome for all stakeholders. I want to thank our shareholders for their support, as well as our customers and partners. My special thanks to the talented people of EMC for their hard work, dedication and passion."
- The release also notes one of the remaining obstacles in the way of completing the deal is securing regulatory approval from China, something that has proved a challenge for some other technology deals just this week. However, the EMC memo does state the deal is expected to be completed within the initially declared timeframe sometime around the fall.
- This news comes just after yesterday's positive earnings report.
Mon, Jul. 11, 12:30 PM
Wed, Jul. 6, 10:39 AM
- Proxy advisory firm Glass Lewis is recommending a vote for merging with Dell, EMC (EMC -0.2%) has announced.
- That's ahead of a special meeting to consider the issue set for July 19.
- "Overall, we find that the proposed transaction is financially and strategically reasonable from the perspective of EMC and its shareholders," Glass Lewis said in its statement. "The proposed consideration represents what is, in our view, an attractive premium to the unaffected closing price of EMC shares and appears generally reasonable in numerous analyses presented by the independent financial advisers, including relative to peer trading multiples, premiums paid and discounted cash flows including stock based compensation expense."
- "The proposed consideration will allow shareholders to realize a substantial portion of their investment in cash and to continue to participate in the future performance of VMware (VMW +0.4%)."
Mon, Jun. 20, 2:45 AM
- Buyout firm Francisco Partners and the private equity arm of activist hedge fund Elliott Management are in advanced talks to acquire Dell's software division for more than $2B, Reuters reports.
- Divesting the software assets will help Dell refocus its technology portfolio and bolster its balance sheet after it agreed in October to buy data storage company EMC Corp. (NYSE:EMC) for $67B.
Tue, May 17, 12:34 PM
- As it nears closure as soon as today on one of the biggest bond deals ever, Dell is upsizing its offering tied to a takeover of EMC (EMC -0.3%) by another 25%.
- It's selling $20B in notes, up from a previous plan for $16B. That's after the company got more than $80B in orders. It's a six-part offering.
- Demand has allowed for lower interest rates; the longest part of the offering ($2B in 30-year bonds) will pay a premium of 5.75 points over similar Treasurys.
- A 10-year note may yield a 1.5-point premium over comparable notes (4.25 points above government debt, down from a previous marketing of 4.75 points).
- Moody's gave the bonds a Baa3 rating, while S&P Global Ratings came in with BBB-.
- Now read How To Play The EMC-Dell Merger »
Wed, Apr. 20, 12:54 PM
- With EMC (EMC +3%) shareholders getting part of their Dell deal payout in the form of a VMware tracking stock, EMC is posting solid gains as VMware rises 13.6% in the wake of a Q1 beat, strong Q2 guidance, and news of a $1.2B buyback.
- EMC itself missed Q1 estimates, thanks to a 6% Y/Y drop in Information Storage revenue to $3.45B. Within the segment, product revenue (drives future services revenue) fell 10% to $1.96B, while services revenue rose fractionally to $1.49B.
- EMC says sales were hurt by "a higher than expected build in unshipped storage product orders of approximately $75 million due to the timing of bookings within the quarter." Cloud storage adoption and an industry mix shift away from high-end storage arrays have also been headwinds. An 8% Y/Y drop in operating expenses for EMC's core Information Infrastructure unit (includes Information Storage) allowed EPS to remain flat Y/Y.
- CEO Joe Tucci reiterates EMC expects the Dell deal to "happen on the original terms and within the originally announced timeframe." EMC has previously guided for the deal to close by October.
- EMC's Q1 results, earnings release
Thu, Apr. 7, 5:13 AM
- As part of the largest technology takeover ever, EMC Corp. (NYSE:EMC) is seeking to sell its Documentum business ahead of its merger with Dell, while the latter is looking to offload its software assets Sonicwall and Quest.
- Bloomberg reports that the divestitures could fetch $6B and $4B, respectively, with private equity firms and strategic suitors expressing interest in the units.
- The moves are aimed at reducing the debt burden the companies will assume if their $67B merger is completed later this year.
Mon, Mar. 28, 6:10 AM
- Japan's NTT Data Corp. (OTCPK:NTDTY), a subsidiary of Nippon Telegraph & Telephone (NYSE:NTT), has agreed to buy Dell's IT services unit for $3.05B, marking one of its largest overseas investments in recent years.
- The transaction would help NTT strengthen its footprint in North America, and will allow Dell to raise cash to help finance its $67B takeover of storage vendor EMC Corp. (NYSE:EMC).
- Dell's IT consulting division, formerly known as Perot Systems, was sold to Dell in 2009 for $3.9B.
- Previously: Dell nears sale of IT unit to Japan's NTT Data (Mar. 28 2016)
Tue, Feb. 23, 11:42 AM
- Less than a week after Reuters reported EU regulators are due to unconditionally approve Dell's planned acquisition of EMC (EMC +0.3%), the companies state the FTC has signed off on the deal - the Hart-Scott-Rodino antitrust waiting period for the deal expired yesterday night.
- The deal still remains subject to approval by EMC shareholders, as well as regulatory approval in other locales. EMC and Dell have forecast the deal will close somewhere between May and October.
Thu, Feb. 18, 1:07 PM
- Two sources tell Reuters EU regulators are expected to unconditionally approve Dell's planned acquisition of EMC (EMC +1.2%).
- Though the report isn't too surprising - EMC and Dell have only a moderate amount of product overlap, largely related to storage hardware - EMC has ticked higher following the report. U.S. antitrust regulators are still reviewing the deal.
- EMC continues to trade at a healthy discount to the deal's official value of $29.34/share - $24.05/share in cash + VMware tracking stock shares with a value of $5.34 based on VMware's current trading price. The VMware tracking stock is expected to trade at a discount to its regular shares.
- Last week, Reuters reported NTT Data is in talks to buy Dell's Perot Systems IT services unit, a deal whose proceeds would help Dell finance the EMC acquisition. SA author Stephen Simpson recently argued market pessimism related to EMC's business and the Dell deal is excessive.
Thu, Feb. 11, 3:03 PM
- Dell had hoped to price on Wednesday the first $10B of debt it needs to raise to finance its $67B purchase of EMC (EMC -1.3%), but credit markets being what they are at the moment, the JPMorgan-led consortium of bankers needs another ten days to get the deal done, reports the NYPost.
- Troubled equity markets are also an issue. Dell had hoped to raise $5B through the sale of its Perot Systems, but supposed front-runner Atos dropped out of the bidding after a big decline in its stock price.
- Dell remains confident its purchase will close by October, but is on the hook for a $4B breakup fee if it can't make good on the acquisition.
- The terms are for EMC owners to get $24.05 per share in cash, plus a VMWare (VMW +0.2%) tracking stock.
Wed, Jan. 27, 3:29 PM
- "We have a binding, solid merger in place," said EMC (EMC -1.2%) CEO Joe Tucci on his company's Q4 earnings call, insisting Dell's acquisition of EMC will occur in spite of the decline seen in both EMC shares and the value of EMC's 80% VMware (VMW -9.3%) stake. "We are confident we’ll meet contractual terms. There are significant penalties in place both ways if this doesn’t happen ... The banks have told us they can raise the money."
- With all eyes on the Dell deal, EMC didn't bother providing formal guidance in its Q4 report. The company's core Information Infrastructure unit saw revenue drop 4% Y/Y in Q4 to $5.07B (-1% exc. forex), with Information Storage sales dropping 4% to $4.65B.
- Exec David Goulden: "Customers are buying ‘just enough’ and ‘just in time’ for their traditional environments." Cloud storage adoption and the growth of upstarts such as Nutanix and Pure Storage have been weighing on sales.
- VMware, meanwhile, has been downgraded to neutral ratings by Baird and Summit Research in response to its soft Q1/2016 guidance (was accompanied by a Q4 beat, a job cut announcement, and news of CFO/COO Jonathan Chadwick's departure). Summit's Srini Nandury: "While the billings will likely be better, we do not expect license revenue growth to return to mid-single digits until middle of next year."
- Pac Crest's Rob Owens (Sector Weight rating): "Emerging businesses showed some bright spots, but the core compute business remains a large portion of the revenue mix, which sets up 2016 for declines in growth. Investor concerns also are likely to persist over the Dell acquisition and the issuance of a tracking stock. We wait for signs of stabilization before becoming more constructive on shares.”
- Weak sales for VMware's core vSphere/ESXi server virtualization platform continue weighing: On its earnings call (transcript), VMware stated compute license bookings (server virtualization) fell by a low-double digit % Y/Y in Q4, and forecast declines will continue. Management license bookings, which include cloud management, the NSX SDN/network virtualization platform, and the vSAN storage virtualization platform, rose by a low-teens %.
- End-user computing license bookings (PC virtualization/enterprise mobility) were a strong spot, rising over 20% Y/Y. The NSX annual bookings run-rate is now above $600M (up ~3x from a year ago), and the vSAN run-rate "well over" $100M.
- EMC: Q4 results, earnings release. VMware: Q4 results, earnings release.