Soon after the ink dried on the EMC Dell merger, the ruler of the new companies, Michael Dell has called up the corporate axeman to slice up those who are not worthy to be in the new kingdom.
Dell will cut 2,000-3,000 jobs, mostly in the United States and mainly in the supply chain, marketing and general and administrative divisions. Actually it could be a lot worse. the combined company has 140,000 employees so 2-3000 people is just a drop in the bucket.
The figure comes from Bloomberg which is quoting its own deep throats. The figure strikes us as a little low.
Dell spokesman Dave Farmer said that it is common with deals of this size, there will be some overlaps we will need to manage and where some employee reduction will occur.
We agree, which is why we think the 2-3000 figure is either the first wave or the most obvious duplications.
Dell, which was taken private by founder Michael Dell along with private equity firm Silver Lake Management in 2013, agreed to buy EMC for $67 billion in October last year.
Tin box shifter Michael Dell is having a few problems getting the cash he needs to buy EMC.
The commitment deadline on $10 billion of pro-rata loans in a $45 billion financing package backing computer giant Dell’s EMC purchase has been extended .
One of the problems was the Chinese New Year, which delayed approval of requests from foreign banks’ home offices to participate in the financing.
Asian banks — Chinese and Taiwanese — have balance sheets and an ancillary connection with Dell and EMC, and at the moment they are short on the paperwork.
But this, coupled with sinking oil prices, equity sell-offs and increased dollar funding costs are making it more expensive for some banks to lend and were expected to make Dell’s pro-rata loans a tougher than expected sell.
Some of the people behind the deal are a little worried. The size of the loans was challenging but trying to do it right now makes it harder.
Dell’s $10 billion pro-rata loans include a $3.5 billion three-year term loan, a $3.5 billion five-year term loan and a $3 billion five-year revolving credit facility.
The loan package also includes an $8 billion seven-year Term Loan B that will be sold to institutional investors and $25 billion of high-yield bonds, both of which will come to the market before the acquisition is scheduled to close in August.
However the thought is that even if the deal takes longer to sell, Dell’s strong enterprise-oriented business model, the credit quality of the name (expected corporate ratings Ba1/BB+, expected debt ratings Baa3/BBB), and a focus on paying down debt are seen encouraging banks to absorb the pro-rata loans.
Tinbox shifter Michael Dell said he could write a $3 billion cheque to buy back VMWare tracking stock to help finance its EMC acquisition.
This is important as it shows that Dell is working out ways to jack-up VMware’s value. The plans to issue a tracking stock have weighed on VMware’s common shares, which have lost a quarter of their value since the acquisition of EMC was announced in October.
Under the deal, EMC shareholders will receive 0.111 VMware tracking share for each EMC share, a move intended to give investors exposure to VMware, which is growing faster than EMC.
Dell said in a registration statement Monday that Dell “intends to consider opportunities to repurchase shares.”
Dell said it could support up to $3 billion in share repurchases and other types of payments and that the amount may increase over time, depending on its net income.
Dell said its goal will be to reduce its debt load in the first 18 to 24 months to achieve an investment-grade rating. Dell will have $49.5 billion in debt under current plans to finance the EMC deal.
Dell has reduced its debt by $4.5 billion, including $2.5 billion paid off by Dell itself. In addition, Denali Holdings, the holding company owned by private equity firm Silver Lake Partners and Michael Dell that controls Dell, paid off a $2 billion loan from Microsoft.
Worldwide revenues from enterprise storage systems grew by 2.8 percent in the third quarter and amounted to a figure of $9.1 billion.
That’s according to a report from IDC, which said capacity shipments were up by 31.5 percent compared to the same quarter last year, and amounting to 33.1 exabytes.
Original design manufacturers (ODMs) which sell directly to hyperscale datacentres appeared to do the best, with this section of the market growing by 23.4 percent year on year with revenues of $1.3 billion.
While external storage systems is the biggest market segment, the $5.8 billion of sales showed a fall of 3.1 percent, year on year.
EMC was the leader in the quarter with 18.4 percent of revenues, followed by HP (16.3%), Dell (9.9%), NetApp (7.1%), IBM (6.4%). The ODMs took 13.7 percent share.
As part of a cunning plan to boost shareholder support for its sale to Dell, EMC appears to be thinking it is wise to retain a majority stake in Virtustream.
It had planned to place the loss-making cloud services provider in a joint venture with VMware. This will help improve VMware’s shares, which have lost about a quarter of their value since Dell’s $60 billion deal to buy EMC was announced on October 12.
EMC’s share value puts the acquisition at risk because Dell was set to pay EMC shareholders $24.05 per share in cash and a special stock that tracks the common shares of VMware.
Word on the street is that under the new plan, EMC would assume Virtustream’s losses by keeping a majority stake, and VMware would only have a minority stake. EMC may announce the plan as early as December.
Under the terms of the Dell deal, EMC shareholders will receive a 0.111 share of VMware tracking stock for each EMC share. Analysts have said the plan would pressure VMware’s share price as it effectively increases the size of the float.
Tin box shifter Michael Dell’s bid to buy EMC might be derailed because the US taxman wants a slice of the action.
According to Re/code Dell $67 billion offer to buy data storage company EMC could be taxed by up to $9 billion, because key aspects of the deal, tracking stock might not qualify for the sort of tax treatment the companies consider essential.
Dell has denied that this is a problem. It thinks that tax authorities would treat the tracking stock in line with previous similar transactions. The merger agreement also has no requirement on this issue that would prevent the deal from closing, the people added.
Tracking stocks allow stockholders to benefit from performance of a specific unit of a publicly traded company, without giving away any ownership or control.
Re/code claimed that Dell insiders were concerned that the creation of the tracking stock will invite scrutiny by the Internal Revenue Service.
If the IRS ruled that the tracking stock qualified as a taxable distribution of shares, it would either require Dell to borrow more money to pay EMC shareholders or derail the deal, Re/code said.
Dell has lined up a debt package for up to $49.5 billion to finance its planned acquisition of EMC, the second-largest M&A financing on record.
The PC maker is preparing to sell around $10 billion in non-core assets, including software and services, to reduce the heavy debt load it will be taking on.
As the tinbox shifter Dell is planning to buy EMC and VMware, the later has shown off some pretty dismal results.
VMware forecast current quarter revenue largely below Wall Street’s estimates, sending its shares down five percent in extended trading.
The company blamed poor sales in due to speculation about its future and weakness in China, Russia and Brazil. How the Dell deal could have influenced the whole quarter when it was only announced last week is anyone’s guess.
VMware forecast revenue of between $1.83 billion and $1.88 billion for the fourth quarter, its seasonally strongest. Analysts on average were expecting revenue of $1.88 billion.
Analysts were not mincing their words. Speaking from a pile of sack-cloth and ashes FBR Capital Markets analyst Daniel Ives predicted “dark days ahead for VMware” as this company is “heading down a troubled path” where death awaits it with pointy teeth – we added the last bit.
VMware also said on Tuesday that it would form a new cloud services business with EMC that would operate under the Virtustream brand.
The new business will be jointly owned by VMware and EMC.
“This initiative is around creating a tighter integration for both companies as they go after the elusive cloud opportunity,” Ives said.
Virtustream’s results will be consolidated into VMware’s financials, starting in the first quarter of 2016.
EMC, which owns about 80 percent of VMware, bought Virtustream for $1.2 billion in July.
VMware’s revenue rose to $1.67 billion in the third quarter ended Sept. 30, from $1.52 billion a year earlier.
* UPDATE: VM Ware will remain a publicly traded company.
inbox shifter Dell has ended speculation and announced its takeover of storage technology firm EMC in a deal worth more than $67 billion today.
What will be the largest tech deal of all time has been conducted without some of Dell’s top managers knowing about it. In fact a lot of them were out of the country when it was leaked.
Sources say that the talks have been conducted directly between CEOs Michael Dell and EMC’s Joe Tucci on the QT.
Numerous terms had not been finalised as of late Sunday night including plans to protect both parties from movements in the value of EMC shares after the deal is announced.
EMC will be allowed to seek superior offers from other companies. But that is just to stop the company being sued by shareholders. The only people likely to counter Dell’s offer HP, Oracle, Cisco Systems and IBM are not interested.
The offer will include cash amounting to $27.25 per EMC share, plus the additional value of tracking stock to account for the value of EMC’s stake in the cloud software firm VMware that would bring the value of the transaction to over $30 per share. Dell will maintain majority control of VMware but will likely sell or distribute a portion of EMC’s equity in VMware to raise cash and offset some of the debt.
Dell is getting the cash by issuing high-yield bonds that will be linked to equity in the combined company.
It is not clear if the deal has been approved by Elliott Management, the activist hedge fund that is EMC’s seventh-largest shareholder. Elliott wanted EMC to spin off its stake in VMware as a way of boosting shareholder value.
It looks like the speculation that Dell wants to buy EMC appears to have more legs than many thought.
Earlier this week, the Wall Street Journal posted a story suggesting a deal was in the offing. But it has followed that original story up by saying that the deal, with its buddies at Silver Lake, would require $50 billion to be available.
The Wall Street Journal is not given to publishing rumours without facts behind them. But there is still some doubt as to whether the deal will go through. The WSJ is saying a deal could take place pretty soon.
Yesterday, at the Canalys Channels Forum held in Barcelona, a senior executive at Dell Europe refused to comment on the matter.
But several attendees asked about the acquisition suggested that it made a lot of sense. HP used to have a strong relationship with EMC but that alliance dissolved some time ago. Dell is committed to selling its products and services through two tier distribution and buying EMC would complement its own channel push, and give it additional leverage in the global market.
An EMC buy would really put Dell in the very top league in terms of market share and would accelerate its move to a two tier model.
Tin box shifter Dell is in talks to buy data storage company EMC in what could be one of the biggest technology deals ever.
Dell has been seen wining and dining bankers to get enough cash to push the deal through. EMC has a market capitalization of about $50 billion so he needs a fair bit to pull the deal off.
The move could further strengthen Dell’s presence among corporate clients at a time when Michael
Dell has been trying to transform the company he founded in 1984 into a complete provider of enterprise computing services like HP and IBM.
It is amazing really because it is only two years since Dell was taken private for $24.9 billion by founder Michael Dell and private equity firm Silver Lake.
EMC has been struggling under pressure from activist investor and shareholder Elliott Management which wants the company to spin off its majority-owned VMware unit.
The House of Elliott plans to give EMC most of October to respond to its demands.
It would appear that the Dell deal has been a while in making. In September 2014, the Wall Street Journal reported that EMC was exploring options and had held talks with Dell and HP.