EMC Misses Q1 Estimates But Dell Deal on Track

"We expect the transaction to happen on the original terms and within the originally announced timeframe,” says EMC's chief executive.
Katie Kuehner-HebertApril 20, 2016

EMC Corp. on Wednesday reported lower-than-expected results for the first quarter due to unfilled orders, but said its $67 billion deal to be acquired by Dell remained on track.

The Hopkinton, Mass. firm posted 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, due in large part to a higher-than-expected increase in unshipped storage product orders of roughly $75 million due to the timing of bookings within the quarter.

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Analysts projected 33 cents in adjusted per-share profit on $5.63 billion in sales, according to Thomson Reuters.

Still, EMC chief executive Joe Tucci believes the deal with Dell is on track the merger remains on track to be completed by October, despite concerns that it was at risk partly because of a drop in its value.

“Integration planning has accelerated to ensure we begin at full speed upon closing, the leadership team has been established, and we’ve received the vast majority of antitrust approvals required,” he said in a news release. “We expect the transaction to happen on the original terms and within the originally announced timeframe.”

The crown jewel in the deal is EMC’s 85% stake in VMWare, a provider of cloud and virtualization software and services. VMWare’s shares surged late Tuesday surged after the company said it would launch a $1.2 billion stock buyback program.

The move “is an attempt to support the merger’s closure and that has, at least for now, lifted that leg of the deal,” according to The Wall Street Journal.

The stock closed at $58.52, up more than 13%, on Wednesday, and EMC finished at $26.31, up 3%.

Tucci said EMC’s first quarter was “generally in-line with our expectations when adjusted for an excess of unfulfilled orders at the end of the quarter. The broad secular IT trends reshaping our industry continue playing out as we expected.”