The Dell-EMC merger plan has taken a beating in the press and among shareholders (especially VMware shareholders) but it’s on track to close, EMC’s chief executive said Wednesday on the company’s fourth-quarter earnings call.
“We have a binding, solid merger agreement in place,” Joe Tucci told media and analysts. “We are confident we’ll meet contractual terms. There are significant penalties in place both ways if this doesn’t happen.”
And as to whether Dell will be able secure the funding needed to pull this $67 billion ball over the goal line, Tucci said: “The banks have told us they can raise the money.”
He did acknowledge the flak that the proposed merger faced, including swooning stock prices, noting that this volatile environment has not “been kind to any security.”
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“This is a really big deal and there’s lot of noise in the system and there are a lot of people with a lot of opinions and a lot of them are not based on fact,” he noted.
But EMC (EMC) and Dell, led by its founder Michael Dell, have taken at least some of that noise to heart. For example, they reversed their stated plan to move VMware’s vCloud Air product into EMC’s Virtustream enterprise cloud unit because VMware (VMW) shareholders didn’t like the idea. EMC owns a majority stake in VMware.
And, on New Year’s Eve, EMC said it was taking a $250 million charge related to its previously announced plan to cut $850 million in costs, including layoffs. VMware got into the cost-cutting act as well, confirming on Tuesday that it too is laying people off.
If the issues are all ironed out, the deal is expected to close by October.
But getting back to the fourth-quarter results, for that period, EMC logged a profit of $771 million (39 cents a share), off from $1.15 billion, (56 cents a share) from a year ago. Excluding merger-related costs and other items, earnings per share fell to 65 cents from 69 cents. Revenue fell 0.05% to $7.01 billion. Analysts had expected 65 cents profit on $7.12 billion in revenue.
Keeping an eye on things will be longtime EMC financial exec Denis Cashman, who was named its chief financial officer on Tuesday. Former EMC CFO Shane Rowe is taking that same job over at VMware, starting March 1.
Given the pending merger, EMC provided no guidance going forward.
There were some bright spots, and Tucci and David Goulden, chief executive of EMC’s Information Infrastructure unit (EMCII), did their best to highlight them.
EMC claimed victory in flash, or solid-state storage, an increasingly hot market. “XtremIO revenue for the fourth quarter exceeded the revenue of our closest competitors over the last four quarters,” Goulden said, without naming that rival, which is presumably Pure Storage. (PURE-STORAGE).
For more, read: So much for that unified EMC-VMware cloud effort
EMC bought XtremIO for a reported $430 million in 2012 and moved quickly to get those products into the market. A few months ago, storage competitor NetApp (NTAP) bought SolidFire, another flash player, for $870 million. In flash EMC competes not just with those companies but with IBM (IBM) and Pure Storage.
And there will be more to come, as EMC will ship a new flash product, from its acquisition two years ago of DSSD, later in the first quarter; and it is also working on “flash-optimized” versions of its legacy VMAX and VNX storage products. The VMAX will target high-end customers who need it as their primary storage system while VNX will focus on midtier companies.
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EMC, like its federation partner VMware, which reported earnings Tuesday, is navigating a tricky transition from its older cash-cow businesses (non-flash storage in EMC’s case and server virtualization in VMware’s) to newer, higher margin products. The problem is that those glitzy newer products might sell great, but it’s unclear whether their sales can make up for the price and demand erosion of the older product lines.
This story was updated at 1:25 p.m. EST with more of Mr. Tucci’s remarks.