See Denali Holding Financial Summary below. After Dell, Silver Lake and MSD Capital paid $20.1 billion to take Dell private in October 2013, run rate free cash flow improved from $1.5 billion (then) to $2.5 billion (LTM through Q1'17 ended 4/29/16). Michael Dell has a good track record of achieving synergies and de-leveraging. Dell Technologies is expected to benefit from $2 billion of synergies within the first 1-2 years post close. After DELL is merged with EMC the company will be renamed Dell Technologies and its businesses will be reorganized into 5 segments: Enterprise Solutions (combining EMC Info Storage and Dell Enterprise), Client Solutions (Dell PCs, notebooks, tablets, branded peripherals), VMware (VMW virtualization and cloud products), SecureWorks (SCWX cyber security products), Emerging Cloud Solutions (includes Pivotal and Boomi) and Dell Software. See VMWare Financial Summary (Table 4) below. VMW's core server virtualization product vSphere is fading as clients opt to rent rather than buy IT infrastructure on a public cloud but VMW's newer virtualization and hybrid cloud products are gaining acceptance that allows VMW to resume growing its top line by expanding from the clients' servers into clients' networks and storage VMW's 32% gross margins have remained stable throughout in PCs, the multi-year declines in sales likely reached an inflection point this year as consumers are now swapping 4-year-old PCs for higher-end PCs and 2-in-1 laptops or getting forced to upgrade to new PCs after installing Windows 10. Financial Summary (Table 2) and EMC Segment Analysis (Table 3) below. EMC's networked system storage business is being upended by competing cloud models, new direct-attached storage architecture and virtualization even as EMC beat Q2'16 estimates by selling infrastructure as a service and cutting costs EMC's opportunities rest with Emerging Storage (e.g., all-flash xtremeIO and software defined ECS) still, EMC is a cash cow, generating about $4.5 billion of free cash flow in the LTM period. and Subsidiaries Financial Summary (Table 1) below. ( HPE) are likely not sustainable since pricing for servers remains under pressure. Dell's core server business is facing tighter corporate IT hardware budgets affecting other parts of its hardware product line the same applies to EMC and competitors Lenovo and Cisco share gains at Hewlett Packard Enterprise Inc. In Q2'16 EMC reported $6 billion total revenue of which $1.68 billion (or 28%) was credited to VMW.Įach of the merged companies has its challenges and opportunities: EMC's revenue and operating income highlights the importance of VMW within the company. Dell is paying EMC shareholders $24.05 per share in cash and issuing 0.111 shares of a tracking stock in VMW per share of EMC held. VMW is a lead player in data center virtualization and the cloud. The merger also gives Dell control of EMC's 80% owned VMWare ( VMW). The combined company will have leading positions in servers, storage, virtualization and PCs and be well positioned in other fast growing IT segments: Digital Transformation, Software Defined Data Centers, Hybrid Cloud, Converged Infrastructure, Mobile, and Security. The rationale…? The deal diversifies Dell's product mix, merging its 4th place ranking and expertise with servers (14% market share) with EMC's number one position in data storage (and 24% market share). The merged entity, to be renamed Dell Technologies, would have pro forma FYE 1/29/16 revenue of $74.0 billion, gross margin of $19.2 billion, and an operating loss of $2.9 billion. The largest tech company acquisition ever is on track to close within the next 2-3 months after receiving a 98% thumbs up vote from EMC's shareholders this past Tuesday 7/19. Dell Inc.'s ( NYSE: DELL) $63.5 billion proposed acquisition of EMC Corp ( EMC) was announced in October 2015.
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