Technology

Dell Parent Posts Loss from EMC Deal

Denali Holding's first-quarter profits were hit by costs related to Dell's pending acquisition of EMC Corp. and a 2% decline in revenue.
Matthew HellerJune 10, 2016

Dell’s parent company on Friday reported that profits were hit by costs related to Dell’s pending acquisition of EMC Corp. and weaker-than-expected sales.

For the first quarter, Denali Holding posted an operating loss of $161 million, an improvement from last year’s loss of $335 million but steeper than the $100 million it had forecast last month.

Revenue fell 2.4% from a year earlier to $12.5 billion, driven by a decline in revenue from the company’s client and enterprise groups, and flat software sales. The company had forecast $13.2 billion in May.

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As the Wall Street Journal reports, Denali also “booked $90 million in costs classified as ‘other corporate expenses,’ a bucket that includes merger-and-acquisition related charges.” The multibillion-dollar EMC deal is awaiting regulatory approval from China and an EMC shareholder vote slated to take place July 19.

Denali is planning a $3.25 billion debt offering to help finance the transaction.

“Overall, we were pleased with our results this quarter,” Denali’s CFO Tom Sweet said in a news release. “We’re continuing to make balanced decisions between growth and profitability, while making investments that position us to address our customers’ critical IT needs in the data center.”

Dell’s Enterprise Solutions Group posted sales of $3.6 billion, a 2% drop from a year ago, and operating income dipped 20% to $192 million, reflecting some slackening in demand for the company’s servers, networking and data storage offerings. Client Solutions’ revenue fell 3% to $8.6 billion.

“Dell is holding pretty steady in its market share for data center infrastructure — actually, it has been nudging up slightly — and for the cloud infrastructure segment of the market, its market share has also been relatively stable. Despite increased levels of competition, Dell is doing OK,” John Dinsdale, chief analyst at Synergy Research Group, told eWEEK.

Denali’s overall profit of $55 million reflected a $481 million gain from discontinued operations. Dell said in March it would sell its information-technology services unit for about $3.1 billion.