Over 20% Upside For EMC
Chris DeMuth Jr. • 43 Comments
Chris DeMuth Jr. • 43 Comments
EMC: As Growth Begins To Accelerate, Shares Remain Undervalued
Helix Investment Research • 12 Comments
Helix Investment Research • 12 Comments
Tue, Apr. 19, 5:30 PM
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)
Wed, Mar. 2, 12:05 PM
- Pure Storage (PSTG +2.7%) is up 16% on the week ahead of this afternoon's FQ4 report. Shares are still ~$1.50 below their $17 October IPO price.
- Pure's gains come after EMC unveiled the first all-flash array from its DSSD unit (acquired in 2014 for a reported $1B) on Monday morning. EMC shared impressive specs for its first DSSD array, known as the D5: Up to 10M IOPS and 100GB/s of bandwidth, 144TB of storage in a 5-rack-unit form factor, and - with the help of direct PCIe links to servers - just 100 microseconds of latency (on par with PCIe server flash cards). However, given the hype surrounding DSSD over the last two years, some Pure investors might be breathing a sigh of relief.
- DSSD's arrays target performance-intensive analytics, database, and data-processing applications. EMC also services the all-flash array market via its XtremIO arrays, and has just launched (in tandem with the D5) all-flash offerings for its high-end VMAX array line. The company thinks all storage used for production apps will be flash-based by 2020, with hard drives used mainly for bulk and archive storage (Pure is unlikely to disagree).
- Elsewhere in the market, NetApp is set to buy Pure rival SolidFire for $870M, and Nimble Storage (has traditionally sold more to SMBs than enterprises) recently showed off its first all-flash arrays.
Wed, Mar. 2, 3:24 AM
- Michael Dell's historic $59B acquisition of storage vendor EMC is moving forward, with the latter's shareholders on track to vote on the deal "later in the spring."
- What will the management structure look like post-merger? EMC executive David Goulden will be in charge of the Enterprise Systems Group. Dell's Jeff Clarke will remain in charge of the PC business, and Marius Haas, another Dell executive, will be President and Chief Commercial Officer.
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.
Fri, Feb. 19, 11:36 AM
- Digging through this week's 13F filings, Evercore ISI's Pankal Patel and team attempt to separate the holdings of hedge funds and other active managers.
- What they found were that institutions (active managers) were most overweight Wells Fargo (NYSE:WFC), IBM, and Coca-Cola (NYSE:KO). Two new names on the overweight short-list: Level 3 Communications (NYSE:LVLT) and Zimmer Biomet (NYSE:ZBH).
- Hedge funds, on the other hand, were most overweight Time Warner Cable (NYSE:TWC), Priceline (NASDAQ:PCLN), and Netflix (NASDAQ:NFLX). Hedge funds also added to holdings of AIG, Humana (NYSE:HUM), Alphabet (GOOG, GOOGL), and EMC during Q4.
- Also of interest: While consumer discretionary stocks (NYSEARCA:XLY) continue to be the top over-weighted sector for hedge funds, they pulled back from those names considerably during the quarter, and added to tech (NYSEARCA:XLK) in a big way. They also added to their underweight in the consumer staples stocks (NYSEARCA:XLP).
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.
Fri, Feb. 12, 8:34 PM
- Price is the sticking point in what have become exclusive talks between NTT Data (NYSE:NTT) and Dell over Dell's sale of Perot Systems -- a key piece of financing for Dell's blockbuster $67B purchase of EMC, Reuters reports.
- Earlier reports had NTT Data and India's Tata as the two suitors left for Perot, after the apparent leader, France's Atos (OTCPK:AEXAF), dropped out, along with previous overtures by Cognizant Technology Solutions (NASDAQ:CTSH).
- Dell's been seeking $5B for the unit, but if a bigger deal isn't available, NTT Data may want parts of Perot Systems. A source tells Reuters talks will continue for the rest of the month.
- Dell is sticking to its guns that the EMC deal will close by October (vs. paying a $4B breakup fee). It hoped to price $10B of debt on Wednesday, but roiling credit markets are forcing a delay on that piece as well.
- Previously: Dell/EMC deal hung up on financing (Feb. 11 2016)
- Previously: EMC insists Dell deal on track; VMware hit with downgrades due to guidance (Jan. 27 2016)
Fri, Feb. 12, 8:36 AM
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.
Wed, Jan. 27, 7:09 AM
- EMC (NYSE:EMC): Q4 EPS of $0.65 in-line.
- Revenue of $7.01B (-0.6% Y/Y) misses by $120M.
Tue, Jan. 26, 5:51 PM
- VMware (NYSE:VMW) has guided on its earnings call for 2016 revenue of $6.8B-$6.9B and EPS of $4.07-$4.16, below a consensus of $7.21B and $4.20. Q1 EPS guidance of $0.83-$0.85 is below a $0.92 consensus.
- Initially up after hours in response to VMware's Q4 beat, shares have now fallen to $46.09, making new 52-week lows in the process. The results/guidance have been accompanied by news CFO/COO Jonathan Chadwick is leaving (he'll be replaced as CFO by EMC CFO Denis Cashman) and that the company is cutting 800 jobs (100 less than previously reported).
- Parent EMC, whose shareholders are due to receive a VMware tracking stock as part of their Dell acquisition payout, is down 1.8% after hours to $23.86 ahead of tomorrow morning's Q4 report.
Tue, Jan. 26, 5:30 PM
Tue, Jan. 26, 4:26 PM
- VMware (NYSE:VMW) uses its Q4 report to state CFO/COO Jonathan Chadwick "has decided to leave VMware and expands his advisory roles, working with a number of companies as a non-executive board member."
- He'll be replaced as CFO (but not COO) by EMC CFO Zane Rowe. EMC vet Denis Cashman is the storage giant's new CFO.
- VMware is higher in response to its Q4 beat; license revenue rose 6% Y/Y, towards the high end of a 3%-7% guidance range. EMC is up 0.6% after hours. VMware typically provides guidance during its earnings call (starts at 5PM ET).
- VMware's Q4 results, earnings release
- Update: VMware has also confirmed its rumored job cuts. 800 positions will be eliminated, slightly less than the 900 previously reported. A $55M-$65M charge is expected. (8-K filing)
EMC Corp. is an information technology company, which develops, delivers and supports a range of information infrastructure and virtual infrastructure technologies, solutions and services. It enables businesses and service providers to transform their operations and deliver information... More
Industry: Data Storage Devices
Country: United States
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