Dell-EMC Deal
Joe Tucci

EMC CEO Tucci Maintains Deal With Dell Still On Track To Close Later This Year

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EMC CEO Joe Tucci, responding to an analyst’s question on this morning’s earnings call about the status of the Dell deal, let it be known in no uncertain terms that the deal is going forward as planned.

Responding to a question (which starts at around the 39 minute mark) from Maynard Um of Wells Fargo, Tucci admitted that there has been a lot of noise about possible pitfalls in this deal, but he insisted the reports of problems have been largely based on bad information.

“This is a really big deal. And there is a lot of noise in the system. And there are a lot of people with lots of opinions. And a lot of them are not based on a lot of facts. As we are doing this, there’s a tremendously increased market volatility, and I think it’s really fair to say that this environment has not been kind to any security,” Tucci said in the call.

Regardless of that noise or current unfavorable market conditions, he said they have a firm deal in place and that all indications are that it’s going forward.

“What gives us strength is that we have a binding solid merger agreement in place. We are highly confident in the contractual terms we have in place, that we will meet those contractual terms. There are significant penalties in place both ways if this doesn’t happen,” he said.

This is a really big deal. And there is a lot of noise in the system. And there are a lot of people with lots of opinions. And a lot of them are not based on a lot of facts.
— EMC CEO Joe Tucci

Dell announced it was buying EMC last October for $67 billion, at least $50 billion of which will be financed with debt. That level of debt has been called into question as has the structure of the deal, which is tied partly at least to what it is known as the tracking stock price of VMware, an independent member of EMC’s federation of companies in which EMC has an 80 percent ownership stake. The price of VMware’s stock has dropped from a high of $82.09 five days before the deal was announced last October to $44.88 as we published this story.

A re/code article published last fall suggested the deal could be in trouble because of tax questions related to the tracking stock. Multiple other reports have suggested the acquisition could have issues crossing the finish line. Most recently, a USA Today report published last week indicated if the EMC share price dropped below the purchase day price of $24.05 a share, it could put the deal in jeopardy.

Tucci insisted the banks have told them that they can raise the money in spite of these reports.

“The banks are fully committed. And, again, what does that mean? It means that the banks have told us they can raise the money. We’re split rated. There are things we can do to improve that rating that you can speak to Dell about. This gives us confidence. If you look at our progress, if you look at our cash flow, we were right on target,” he said.

He said the deal is still on track to close this year as planned. He couldn’t point to an exact date, but he said the two companies are still shooting for between May and October.

“So we’re confident. We know what we’re doing. And again, focus on cash flow, our cash flow is really good,” Tucci said.

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