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EMC has a shoddy year

On the back of a less than stellar year, chief says that the Dell-EMC deal is well on track

Against all the odds, the EMC-Dell transaction ‘remains on track’, according to EMC boss Joe Tucci.

EMC reported its fourth quarter and financial year earnings yesterday, and it wasn’t a pretty sight. Consolidated revenue was $7bn, down a smidgen from $7.05bn in the year ago period, while. GAAP net income was $771m, down a depressing 33% year over year from $1.15bn.

Full-year 2015 revenue was $24.7bn, up just 1% year over year or 5% on a constant currency basis.

Tucci was keen to plaster a nice rouge lipstick on his pig.

“I was disappointed that we fell a bit short on revenue, which was $7.01 billion essentially flat year-on-year,” he said. “However, I would like to point out that it follows 24 consecutive quarters of reported year-on-year top line growth. An accomplishment that very few our technology peers matched.”

The elephant in the room was of course the Dell takeover. Tucci waxed lyrical about the deal and the positive impact it would have on the business. 

“As I’ve said before, the coming together of Dell and EMC is a game-changer. It creates a powerhouse in the technology industry with approximately $80bn in revenue.”

“I am pleased to report that progress on closing the transaction remains on track on the original terms and timeline.”

Ironically, the earnings that Tucci was commenting on could become a stumbling block for the deal's progress.

Dell is taking on over $40bn of debt to fund the acquisition; and given the volatile market conditions, the consortium of lenders bankrolling deal will no doubt be treating such a large transaction with caution. With that in mind, stalling revenue and declining profit will hardly inspire confidence. If the enthusiastic executives are to be believed though, the $40bn is as good as in the bank and it is full steam ahead for the mega-merger.

Tucci also reaffirmed his optimistic position on a post-deal VMware.      

“Mike [Dell] and I are both incredibly excited by the prospects for this great company and I firmly believe that Mike will be an outstanding steward for this franchise,” he said. “Subsequent to closing of the transaction Michael will be VMware's largest shareholder. I know he will be laser-focused on increasing the value of VMware for all stakeholders and we will ensure that VMware has the right resources and people that fully realise its potential.”

Despite his best efforts, Tucci’s words aren’t likely to move the market. The impending deal looms large over EMC’s share price, which has fallen some 13% since the $67bn deal was announced. Given that the company currently has a market cap of just $47.1bn, investors will be quietly praying that the deal makes it over the finish line sooner rather than later.  



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