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Dell Discloses Quarterly Revenue Decline, $7.7 Billion Cash Commitment For EMC Buy

For the first time since going private in 2013, Dell published financial results -- in an SEC filing related to the proposed $67 billion acquisition of EMC.

As Dell proceeds toward the acquisition of data storage giant EMC, it is coping with quarterly revenue declines as well as the need to raise money to pay for the merger.

For the first time since going private in 2013, Dell has published financial results -- in a U.S. Securities and Exchange Commission filing made by holding company Denali Holding Inc. related to the proposed $67 billion acquisition of EMC.

In Monday's filing, Dell says it and EMC have committed about $7.7 billion in cash to help finance the merger. Dell is expected to take on around $50 billion in debt as part of the EMC acquisition. Founder and CEO Michael Dell has said the company would focus for the first 18 to 24 months after the deal closes on aggressively paying down that debt.

[Related: Partners: VMware Waving White Flag On EMC Virtustream Venture Creates Cloud Chaos]

The company has paid off about $4.5 billion in debt in the past two years, and is still carrying about $11 billion related to the $24.4 leveraged buyout that took the company private.

In the filing, Dell also reported a 6 percent year-over-year revenue decline for the quarter ended in July, underscoring the industry's struggle to cope with lackluster PC sales. For the fiscal year ended in January, Dell reported a 5 percent year-over-year revenue increase.

However, operating profit for the year fell to $3.2 billion from $4 billion the previous year.

Stephen Monteros, vice president of sales operations at Ontario, Calif.-based Dell partner Sigmanet, said that despite channel growing pains, Dell has been a solid partner since going private.

"The numbers simply reflect an overall industry trend," Monteros said. "They've made channel investments, and they started retooling around data center, storage and cloud. It's a work in progress, and they realize they require channel partners to move further in that direction. The foundation is laid."

As it seeks to gather funds to offset the cost of the EMC merger, Dell is looking to sell about $10 billion in assets, including its SonicWall security business and Quest Software for about $2 billion each, along with Perot Systems, according to reports.

With a price tag of about $5 billion, Dell has shopped Perot, an IT services firm it acquired in 2009 for about $3.9 billion, to several international firms, including Tata Consultancy Services of India; Atos, a French IT outsourcing firm; New York-based Genpact and CGI, a Canadian IT firm, according to a Re/code report.



In a move hailed by channel partners, Dell filed an IPO for its SecureWorks business earlier this year.

Dell has offered $33.15 a share for EMC, which includes $24.05 in cash and $9.10 in tracking stock linked to VMware's performance. VMware is 81 percent owned by EMC. The merger is expected to close between May and October of 2016.

The value of VMware stock has declined more than 25 percent since the merger deal was announced in October. EMC stock has taken double-digit declines as well. It's possible that EMC could declare a special dividend or make billions of dollars in share buybacks to placate investors anxious about the merger and the declining value of their EMC and VMware stock.

VMware Monday pulled out of the Vitrustream Cloud Services business, a would-be joint venture with EMC.

PUBLISHED DEC. 17, 2015

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